Mid-Cap Funds Draw ₹14,756 Crore, Small-Cap Funds ₹15,586 Crore in FY25’s First Half

Mid-cap and small-cap mutual fund schemes have witnessed a significant surge in investor interest, with inflows reaching approximately Rs 30,350 crore from April to September of the current financial year, as reported by the Association of Mutual Funds in India (AMFI). In contrast, these funds attracted Rs 32,924 crore during the same period last year.

This ongoing trend persists despite market regulator SEBI’s alerts regarding the rapid influx of investments into these funds, driven by strong returns. Experts believe that investors will continue to favor these categories due to their high growth potential. “The small-cap segment is poised for robust growth over the coming years. I anticipate sustained inflows as Indian investors actively seek opportunities in high-growth sectors. Small-cap funds should be seen as an essential part of an investment portfolio rather than a mere tactical choice,” stated Sandeep Bagla, CEO of Trust Mutual Fund.

In FY25’s first half, mid-cap funds received Rs 14,756 crore, while small-cap funds garnered Rs 15,586 crore, totaling Rs 30,342 crore in inflows according to AMFI data. Both indices have outperformed large-cap indices, with mid-cap and small-cap indices gaining around 20% and 24%, respectively.

Tradejini COO Trivesh emphasized that the strong demand for mid-cap and small-cap mutual funds stems from their potential for high returns. A stress test conducted in March 2024 has further enhanced confidence in fund managers’ abilities to manage market volatility. Feroze Azeez, Deputy CEO of Anand Rathi Wealth Ltd, indicated that mid-cap and small-cap segments are expected to grow at rates of 20% and 25% in FY25, predicting robust inflows as systematic investment plan (SIP) contributions reach new heights.

However, caution was advised by Manish Kothari, Co-Founder and CEO of ZFunds, who noted that a correction in broader markets could lead to a decline in inflows into mid- and small-cap schemes.

Conversely, large-cap mutual funds recovered from last year’s outflow, attracting over Rs 7,067 crore during the April-September period of FY25. As investor interest grows, the number of accounts in mid-cap and small-cap schemes has surged by 1.32 crore year-on-year, nearing 4 crore by September 30, 2024. Overall, the assets under management for mid-cap and small-cap schemes soared by 63%, reaching Rs 7.26 lakh crore at the end of September 2024, up from Rs 4.44 lakh crore a year prior.