Sectorial Performance of Indian Mutual Funds Post-Covid

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 Sectorial Performance of Indian Mutual Funds Post-Covid

The Covid-19 pandemic has been a defining moment for economies worldwide, and the Indian mutual fund industry is no exception. As we navigate the post-pandemic landscape, it’s crucial to understand how different sectors within the mutual fund industry have fared and adapted to the new normal.


A Resilient Comeback

Despite initial setbacks due to the pandemic-induced lockdowns, the Indian mutual fund industry has shown remarkable resilience. The Systematic Investment Plan (SIP) collections fell by 4% to ₹96,000 crore in the fiscal year 2020-21, reflecting the income uncertainty faced by investors. However, the industry bounced back with the Average Assets Under Management (AAUM) standing at ₹38.56 trillion as of February 2022.


Equity Funds: The Growth Engine

Equity funds have been the growth engine for the mutual fund sector, with the AAUM of the industry growing nearly 30% over a year as of December 31, 20211. The value of assets held by individual investors in mutual funds increased by 22.32% from February 2021 to February 20221. This growth trajectory continued into 2024, with the AUM of open-ended equity funds growing by 55% and standing at ₹23.49 lakh crore in March 2024.


Debt Funds: A Steady Ship

Debt funds have maintained a steady course, with a modest growth of 7% in the AUM of open-ended debt funds in March 2024 compared to the previous year2. This stability is indicative of the cautious approach adopted by investors seeking safer investment avenues during uncertain times.


Digital Penetration: A Catalyst for Growth

The mutual fund industry’s growth has been significantly aided by digital penetration. The ease of registering SIPs through online fintech portals has attracted a large number of new first-time investors. The number of SIPs and monthly collections have increased, although the average ticket value per SIP has decreased1.


Sectoral/Thematic Funds: Riding the Wave

Sectoral/thematic funds have witnessed significant net inflows, with ₹46,138 crore in FY24, followed by small cap funds with net inflows of ₹40,189 crore. This indicates a growing investor interest in niche markets and specific sectors, aligning with the broader economic trends and recovery patterns.


The Road Ahead

As the mutual fund industry continues to evolve in the post-Covid era, it is expected to witness further diversification and innovation. Investors are likely to remain keen on equity-oriented schemes, while debt funds will continue to offer a haven for the risk-averse. The sectorial performance of Indian mutual funds post-Covid paints a picture of an industry that is not only recovering but also thriving with new opportunities.


The mutual fund industry’s journey through the pandemic has been challenging yet transformative. With a robust recovery and promising sectorial performance, the future looks bright for Indian mutual funds as they adapt to the evolving economic landscape.


References:

1: Mordor Intelligence 

2: The Economic Times

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