India's Passive Mutual Fund Industry Surpassing Rs. 10 Lakh Crore AUM, says Motilal Oswal AMC study

India's Passive Mutual Fund Industry Surpassing Rs. 10 Lakh Crore AUM, says Motilal Oswal AMC study

 

Mumbai 21 August 2024: According to 'Where the money flows' study by Motilal Oswal Asset Management Company (MOAMC), India's asset management industry has witnessed a remarkable growth of >7X in the last 10 years, with its assets under management (AUM) growing to INR 61.2 lakh crore in June 2024, from INR 8.3 lakh crore it stands in December 2013. It reveals that Passive Funds AUM has grown to 10.2 Lakh Crore with 17% of total market share, while AUM of Active Funds stands at 50.9 Lakh Crore, as of June 2024.

The study 'Where the money flows' aims to present a snapshot, highlighting the dynamic shifts and patterns that have shaped the mutual fund landscape in the past quarter. As per the study, Equities take away the majority of the share with 59.75% of total AUM, followed by 26.95% in Debt, 8.85% in Hybrid and 4.44% in others.

Prateek Agrawal, MD & CEO, Motilal Oswal Asset Management Company Ltd said, "The rise of AUM in India's asset management industry reflects the country's dynamic and rapidly evolving financial landscape. As more investors enter the market, the industry is poised for sustained growth. For asset managers, the challenge will be to innovate and adapt to the changing needs of investors, ensuring that they remain relevant in a competitive market. They need to stay agile, informed, and ready to embrace the opportunities and challenges that lie ahead."

 

Pratik Oswal, Chief of Business Passive Funds, Motilal Oswal Asset Management Company Ltd said, "The financial markets are constantly evolving, and staying informed about where the money is flowing is essential for making sound investment choices. The latest "Where the Money Flows" report from June 2024 offers a deep dive into the current trends driving these movements, shedding light across categories attracting most interest from investors." 

 

Key highlights of Q1FY25: 

• Quarter in Review: The mutual fund (MF) industry welcomed net inflows of 325K CR (INR 166K CR in debt, INR 143K CR in equity and INR 8 CR  in Multi Asset), spearheaded by almost equal split between Debt and Equity funds. This quarter saw the launch of 35 new schemes that collectively amassed over 27K CR
• Active Funds markets share at 83%, AUM grown to 50.9 Lakh Crore as of June 2024. While, Passive market share at 17% with AUM of 10.2 Lakh Crore as of June 2024
• Active Broad-based, Thematic and Arbitrage Funds Shine: In the Equity segment, Broad Based and Arbitrage funds stole the spotlight, capturing over 73% of the net inflows in the equity category
• Debt Funds Face Inflows: Debt funds encountered significant net inflows, primarily driven by Liquid & Money Market funds (>85% of net inflows in this category), followed by Overnight funds. Passively managed Liquid and Long Duration funds saw significant net inflows, given their relatively small AUM.
• Traction Continues in Hybrid Funds: The last quarter continued the resurgence of Hybrid funds with Multi Asset funds in the lead with net inflows of 8.5K CR, followed by Equity Savings (3.2K CR) and Balanced Advantage (2.6K CR) funds.
• International Funds Continue Pause: Investors increasingly shied away from international funds as they witnessed net outflows of 1.5K CR, predominantly driven by outflows from active funds.

Debt funds takes a front seat             s per MOAMC study, Active Debt funds experienced net inflows of approximately ₹163K CR in Q1FY25. highest across all categories.

 

Overall, the MF Industry recorded net inflows of approximately ₹325K CR in the April – June quarter. Active Equity led the way with net inflows of about ₹280K CR, followed by ₹45K CR in Passive Equity. On the Passive side, Equity claimed the highest share with around 88% of net inflows, while commodities held an around 8% share. 

Investors flock to Broad Based ,Arbitrage funds and Thematic Fundst ~73% of market share, Arbitrage & Broad Based funds took away the lion's share of net inflows in June quarter.

 Broad Based funds in both Active & Passive Equities attracted significant net inflows as equity markets continued to rally in the last quarter. Among Active Equity, Thematic funds saw net inflows of ₹20K CR & Arbitrage funds saw net inflows of ₹30K CR. In Passive Equity, Factor funds attracted net inflows of ₹5K CR, with the Momentum factor alone contributing to nearly half of these flows.

Multi-Cap & Flexi Cap lead to major contribution in the Broad Based segment

nvestors continued to bet on Broad Based funds across all the categories with 45K CR net inflows in active and 32K CR net inflows in passive in Q1FY25.

 Multi Cap, and Large & Mid Cap funds picked up steam, attracting net inflows of more than 7K CR each.

Investors continued to prefer Passives for their Large Cap allocations with the category receiving greater than 95% of all net inflows in passive segment.

 

 

Source/Disclaimer: AceMF, MOAMC. Data as of 28-Jun-24. Readers should note that all the data & figures mentioned in the below report are estimates and may not be in-line with actual cash flows in the industry. The data is sourced from a third-party vendor & all Net Flows are calculated after adjusting monthly returns on the fund AUM. Motilal Oswal AMC is in no way responsible for the accuracy of the data.

Infrastructure category lead the Thematic segment

Investors also took to bet on Active Thematic funds highlighting with 20K CR net inflows. Infrastructure, Manufacturing, Business cycle funds and PSU picked up steam, attracting net inflows of more than 2K CR each. Passively managed thematic funds of PSU Category saw highest net inflows among passive segment in thematic, considering relatively small AUM.

Active Constant Maturity and Passive Target Maturity drive net inflows

As per study, Debt Funds faced substantial net inflows in the June quarter across both Active and Passive funds. While, Constant Maturity funds dominated the inflows making up over majority of flows in Active Debt Category followed by Gilt and Corporate Bond funds with some inflows

Liquid & Money Market funds drive Estimated Net Flows

Liquid & Money Market funds drove the category net inflows (>85%), followed by Overnight funds, in the June quarter. Low Duration and Ultra Short funds saw net inflows greater than 10K crore. Generally, investors use debt funds with maturity up to 1 year to park excess cash in the short term leading to high volatility in inward & outward flows. Passively managed Liquid funds saw significant net inflows, given their relatively small AUM.

Multi Asset funds continue to see strong traction

Multi Asset funds led the Hybrid category, securing ~60% of the net inflows, followed by Equity Savings with ~23% and Balanced Advantage at ~17%. Aggressive & Conservative Hybrid funds saw net outflows of 0.3 k Cr each. Multi-Asset Category saw the net flows close to 8.5k crore.

No country for International Funds

During the quarter, Outflows from the International category occurred across categories, primarily attributed to the RBI threshold, which led to few restrictions on new investments in such schemes. Actively managed International Funds saw net outflows of 1k Cr, with a relatively majority in Broad Based Category. Passively managed International Funds saw net inflows of 0.5k Cr, with a relatively majority in Thematic funds.

About Motilal Oswal Asset Management Company:

Motilal Oswal Group possesses legacy in equities for over 3 decades. Motilal Oswal Asset Management Company Ltd. (MOAMC) is registered with SEBI as the Investment Manager for Motilal Oswal Mutual Fund. It was incorporated on November 14, 2008. It provides Investment Management and Advisory Services to investors based within and outside India and having AIF's, Portfolio Management Services business and Mutual Funds.

 

 

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