The trend of investors flocking towards SIPs small- and mid-cap equity mutual funds continued in November 2023, driven by hopes of robust returns amidst a bullish market sentiment. However, overall equity mutual fund inflows witnessed a dip compared to the previous month, as per data from the Association of Mutual Funds in India (AMFI).
Despite the dip, November marked the 33rd consecutive month of net inflows into equity-oriented schemes, indicating sustained investor confidence in the market. So far in the year, equity mutual fund inflows have totaled Rs 1.45 lakh crore, contributing to the soaring performance of benchmark indices like Nifty 50 and BSE Sensex, which reached all-time highs.
The surge in Nifty 50 by 5.52% in November, the highest monthly gain since July 2022, was attributed to favorable liquidity conditions, easing global rate concerns, and strong macroeconomic data. Additionally, systematic investment plans (SIPs) reached a record high of Rs 17,073 crore, with the number of SIP accounts also hitting an all-time high of 744.1 lakh.
Small-cap funds continued to dominate investments for the 14th consecutive month, with inflows totaling Rs 3,699 crore, significantly higher than the Rs 307 crore inflows into large-caps. Mid-cap funds also saw healthy inflows of Rs 2,666 crore, indicating investor appetite for higher-risk assets. The stellar performance of small- and mid-cap indexes, with gains of 48% and 40% respectively in 2023, far outpacing the 15.5% gain in the benchmark Nifty 50 index, underscores the attractiveness of these segments to investors seeking higher returns.
However, analysts caution against indiscriminate allocation to small-caps SIPs, citing the recent rally and stretched valuations as factors that warrant careful consideration. In conclusion, while the overall equity mutual fund inflows experienced a slight decline in November 2023, the sustained interest in small- and mid-cap funds reflects investor optimism and appetite for riskier assets.
As markets continue to rally, investors are advised to exercise caution and conduct thorough research before allocating funds, especially in segments with stretched valuations.
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