New Delhi: In a recent note, financial advisory firm InCred Equities indicated that the inflow of funds through mutual funds (MFs) is likely to experience volatility in the short term.
However, they anticipate that inflows will improve in the medium term, driven by increased participation from retail investors, a better understanding of market fluctuations, and enhanced investment discipline, along with a gradual rise in contributions from areas outside the Top 30 cities.
InCred Equities noted, "The recent decline in certain AMC stocks has made them more appealing for investors."
As of February 2025, the Assets Under Management (AUM) in mutual funds fell by 1 percent month-on-month to Rs 68 trillion, primarily due to weaker inflows into equity funds, among other factors.
Market volatility has historically impacted inflows, as evidenced by the subdued gross equity fund inflows and new SIP registrations, although gross SIP inflows remained robust at Rs 260 billion.
InCred Equities stated, "We expect volatility to persist in the near term, largely influenced by global events. Nevertheless, we maintain a positive outlook for the long term, given the increasing market penetration."
Investor sentiment has shown some weakness, with gross inflows into equity schemes dropping to an 11-month low in February 2025. However, the low gross outflow suggests that investors are remaining patient despite market fluctuations.
Recent months have seen significant volatility, particularly in the previously high-performing small-cap and mid-cap indices, which have experienced sharp declines of 14-18 percent in 2025. Nonetheless, InCred Equities points out that a slight month-on-month decrease of 1.5 percent in systematic investment plan (SIP) inflows, which still remained strong at Rs 260 billion, reflects a growing sense of financial discipline among investors.
We anticipate that volatility will persist in the short term; however, we maintain a positive outlook for the mid- to long-term future, driven by enhanced geographic reach and the growing appeal of mutual fund schemes, particularly among younger and middle-income investors.
