January Profit Booking Brings in Rs 1,287 Crore for Large-Cap Mutual Funds
With an inflow of Rs 1,287 crore into large-cap focused mutual funds in January—the largest fund inflow in 19 months—investors were booking profits due to a notable surge in small and mid-cap stocks. This is a significant recovery from December’s net outflow of Rs 281 crore. Additionally, the amount was 80% more than the Rs 716 crore in inflows recorded in January of the previous year.
The largest-cap equity category’s asset base increased by 26% to Rs 3 lakh crore at year’s end from Rs 2.38 lakh crore thanks to the most recent inflow. The Association of Mutual Funds in India (Amfi) recently released statistics showing that large-cap-oriented equities mutual funds had inflows of Rs 1,287 crore in January. Since July 2022, when the category received an inflow of Rs 2,052 crore, this was the highest amount.
Due to the notable surge in small and mid-cap stocks, investors are taking a profit and shifting their portfolio towards large-cap stocks. According to Kaustubh Belapurkar, Morningstar Investment Research India’s Director-Manager of Research. “Large-caps demonstrated positive contributions in January, reversing the net outflows experienced in December 2023,” said Akhil Chaturvedi, Chief Business Officer of Motilal Oswal AMC. This change in trend indicates that big caps or flexi caps focused schemes may draw more flows in the future since it is consistent with value disparities between large vs. mid and small caps.
The category brought in Rs 307 crore in November and Rs 724 crore in October prior to the withdrawal in December 2023. January of this year witnessed the largest monthly injection of almost two years into equity schemes, with an inflow of 21,780 crore overall. The most recent influx was almost 28% more than the December inflows of Rs 16,997 crore.
In addition, investors kept coming into small-cap focused funds and mid-cap oriented funds, which had inflows of Rs 3,257 crore and Rs 2,061 crore, respectively. According to Feroze Azeez, Deputy CEO of Anand Rathi Wealth Ltd., the total outflow from large-cap funds in FY2024 was around Rs 4,949 crore as of December. Inflows of Rs 34,103 crore were made into small-cap stocks over the same time frame.
Large-cap stocks had an absolute return of 28% for FY2024; small-cap stocks produced an absolute return of more than 60%. He said, “allocations moving towards large-cap is justified, given that this would have created portfolio allocations biased towards mid and small as well as huge run-up in small relative to large.” “Investors are realizing the significant valuation gap with the large-cap segment and making adjustments to their investments accordingly,” according to Gopal Kavalireddi, Vice President of Research at FYERS, “with mid-caps at 15% and small-caps at 20+% premiums.”
On a monthly and annual basis, there are an increasing number of investor folios, indicating a growing interest in large-cap funds. In January, the number of folios increased by more than four lakh on an annual basis to 1.33 crore; on a monthly basis, the number of folios increased by 1.45 lakh.
