Passive mutual funds’ AUM touches ₹10 lakh crore with 17% market share, equity claims 88% of net inflows

The mutual fund industry in India has witnessed a seven-fold growth in the past 10 years with the assets under management (AUM) growing from ₹8.3 lakh crore in December 2013 to ₹61.2 lakh crore in June 2024, a Motilal Oswal report for the quarter ending June 30, 2024, has revealed.

The report ‘Where the Money Flows’ showed that passive funds’ AUM had jumped to ₹10.2 lakh crore, with 17 per cent of the total market share, while active funds’ AUM stood at ₹50.9 lakh crore as on June 2024.

Equities hold the majority share with 59.75 per cent, followed by debt (26.95 per cent), hybrid (8.85 per cent) and others (4.44 per cent).

Equity in passive schemes

The mutual fund industry recorded net inflows of around ₹325K crore in the June quarter of FY2024-25. Active equity led the way with net inflows of ₹280K crore followed by ₹45K crore in passive equity.

As far as passive schemes are concerned, equity claimed a substantial share with around 88 per cent of net inflows, while commodities held around 8 per cent share.

Active debt funds experienced net inflows of nearly ₹163,000 crore.

Key observations

In the equity segment, broad-based and arbitrage funds stole the spotlight, capturing over 73 per cent of the net inflows in the category.

Debt mutual funds encountered significant net inflows primarily driven by liquid and money market funds (more than 85 per cent) followed by overnight funds. Generally, investors use debt funds with a maturity of up to one year to park excess cash in the short term, leading to high volatility in inward and outward flows, the report noted.

Also, the June quarter continued to witness the resurgence of hybrid funds. Multi-asset funds were leading with net inflows of ₹8,500 crore followed by equity savings (3,200 crore) and balanced advantage funds ( ₹2,600 crore).

Additionally, investors refrained from investing in international funds as they witnessed net outflows of ₹1,500 crore, predominantly driven by outflows from active funds to the tune of ₹1,000 crore.