New Delhi witnessed a notable shift in investor sentiment in the final month of 2024, as fresh investments into equity mutual funds moderated while debt schemes faced severe redemptions. According to the latest data released by the Association of Mutual Funds in India (Amfi) on Friday, equity mutual funds attracted a net inflow of ₹28,054 crore in December. This figure marks a sequential decline of over 6 per cent from the ₹29,911 crore garnered in November, though it remains higher than the ₹24,690 crore recorded in October.
Debt Schemes Drag Down Overall Industry AUM
The softening of equity inflows coincided with a contraction in the mutual fund industry's total asset base. The overall Assets Under Management (AUM) slipped marginally to ₹80.23 lakh crore in December from ₹80.80 lakh crore in November. This dip was primarily driven by heavy withdrawals from debt-oriented schemes. The industry reported net outflows of a staggering ₹66,591 crore for the month, largely due to steep redemptions from debt funds, which overshadowed the continued interest in equity and gold categories.
Equity Categories: Flexi-Cap Funds Shine, ELSS Lags
Despite the overall sequential dip, most equity sub-categories continued to enjoy positive traction in December. The clear standout was the flexi-cap fund category, which emerged as the top performer. Flexi-cap funds attracted net inflows of ₹10,019 crore, a significant jump from ₹8,135 crore in November, underscoring their growing appeal amid uncertain market conditions for their flexibility.
Other equity categories that saw robust inflows include:
- Mid-cap funds: ₹4,176 crore
- Large & mid-cap funds: ₹4,094 crore
- Small-cap funds: ₹3,824 crore
- Large-cap funds: ₹1,567 crore
However, not all categories shared the positive trend. Equity Linked Savings Schemes (ELSS) and dividend yield funds bucked the trend by recording net outflows of ₹718 crore and ₹254 crore, respectively. This movement is often attributed to year-end profit-booking and seasonal adjustments related to tax planning.
Massive Exodus from Debt, Safe-Haven Gold Rallies
The most dramatic shift was observed in the debt mutual fund segment. Debt schemes witnessed a massive net outflow of ₹1.32 lakh crore in December, a sharp increase compared to the net outflows of ₹25,692 crore in November. This heavy redemption single-handedly pulled the entire mutual fund industry into negative net flow territory for the month.
Amid this divergence between equity and debt, investors displayed a clear flight to safety. Gold exchange-traded funds (ETFs) saw net inflows surge to ₹11,647 crore in December. This was a substantial increase from ₹3,742 crore in November and ₹7,743 crore in October, highlighting renewed investor interest in traditional safe-haven assets during periods of market volatility and uncertainty.
Market Implications and Investor Sentiment
The December data paints a picture of cautious optimism mixed with risk aversion. The sustained, though lower, inflows into equity funds, particularly in flexible and growth-oriented categories like flexi-cap, mid-cap, and small-cap, indicate a continued belief in India's long-term equity story. Simultaneously, the enormous outflow from debt funds suggests institutional or large-scale year-end rebalancing, liquidity management, or a response to specific interest rate expectations.
The spectacular rise in gold ETF inflows further cements its role as a portfolio diversifier. The concurrent trends of steady equity investment, debt withdrawal, and gold accumulation reflect a mature market where investors are strategically allocating assets based on their outlook and risk appetite as the year turned.
