Inflows soften even as SIPs power on: Motilal Oswal Financial Services
FinTech BizNews Service
Mumbai, May 14, 2025: India’s mutual fund industry achieved a historic milestone in April 2025, with total assets under management (AUM) breaching the Rs 70 trillion (TN) mark for the first time. This surge was largely driven by gains in liquid and equity funds, supported by market momentum. However, even as overall AUM touched new highs, equity inflows showed visible signs of fatigue, declining for the fourth straight month. The divergence points to a maturing investor base—one that’s increasingly tactical and guided by market signals.
● Industry AUM scales a new peak:
The mutual fund industry’s total AUM rose 6.5% month-on-month (MoM) to Rs70 trillion in April. The growth was led by liquid funds (Rs1.56 trillion), equity funds (Rs1.21 trillion), income funds (Rs808 billion), and ETFs (Rs335 billion). Equity AUM alone touched Rs33.5 trillion, up 3.8% MoM, reflecting strong market performance (Nifty +3.5%).
● Equity flows continue to moderate:
Despite rising AUM, net equity inflows fell to Rs258 billion—a 12-month low and the fourth consecutive monthly drop. While redemptions marginally eased to Rs398 billion (down 1.8% MoM), gross equity sales also declined by 5% to Rs656 billion. The data indicates some investor caution, possibly due to valuations or global uncertainties.
● SIP inflows remain resilient:
Systematic Investment Plan (SIP) flows hit an all-time high of Rs266.3 billion in April, rising 2.7% MoM and 30.7% YoY. The sustained growth in SIPs signals that retail investors remain committed to long-term investing, even amid near-term market volatility.
● Sector churn in fund portfolios:
April saw meaningful changes in sector allocations. Weights rose for Private Banks (to a 20-month high of 18.9%), Oil & Gas, Automobiles, Consumer, and Telecom sectors. On the flip side, allocation to Technology, Capital Goods, NBFCs, Utilities, and Cement moderated.
● Banking and consumption-led value additions:
Four of the top ten value additions in fund portfolios were banking majors—HDFC Bank (+Rs157b), ICICI Bank (+Rs118.2b), Axis Bank (+Rs81.1b), and IndusInd Bank (+Rs36b). Meanwhile, stocks like Siemens, L&T, Infosys, and Bajaj Finance saw declines in portfolio value.
● Broader market participation grows:
Mutual funds were net buyers in 60% of Nifty Midcap 100 and 69% of Nifty Smallcap 100 stocks in April. Names like Patanjali Foods, Waaree Energies, NBCC, and Delhivery were among the key beneficiaries, indicating increased diversification beyond large caps.
Despite equity inflows softening, the mutual fund industry’s Rs70 trillion AUM milestone underscores the long-term growth trajectory of Indian savings. With SIPs hitting record highs, the foundation of retail-driven, disciplined investing remains rock solid.
Private banks, oil & gas, and autos emerge as top fund themes in April
April 2025 saw mutual funds rotate their portfolios to align with sector momentum and valuation comfort. Private banks, oil & gas, and automobile stocks saw increased allocations, reflecting investor confidence in core India growth themes. Meanwhile, exposure to technology and capital goods softened, showing cautious sentiment towards sectors with margin headwinds or high valuations.
● Private banks lead the pack once more:
The weight of private banks in MF portfolios rose to 18.9%, its highest in 20 months, driven by strong additions in names like HDFC Bank, ICICI Bank, Axis Bank, and IndusInd Bank. Renewed credit growth, improved earnings visibility, and attractive valuations drove this uptrend.
● Oil & gas and autos gain favour; tech trims continue:
Oil & gas allocation climbed to an eight-month high of 6.4%, while auto moved to 8% weight in portfolios. In contrast, technology saw a third straight month of reduced allocation, dropping to 8.3%, amid global headwinds and near-term margin pressures.
● Clear overweights and underweights emerge:
Funds remained significantly overweight on Healthcare, Capital Goods, Retail, and Chemicals versus BSE 200. Meanwhile, sectors like Consumer, Utilities, and Technology were under-owned, despite their benchmark weights, signalling potential caution or rebalancing.
● Top 20 AMCs see steady equity expansion:
The equity value of the top 20 mutual funds rose 3.7% MoM and 21.7% YoY. UTI MF (+4.3%), Nippon India MF (+4.3%), SBI MF (+4.2%), and Axis MF (+4%) led the gains. Motilal Oswal MF recorded the highest jump at 6%, reflecting active positioning.
● Mid- and small-cap exposure sees strategic additions:
Within the Nifty Midcap 100, stocks like Tata Technologies, Hindustan Zinc, and IDFC First Bank saw notable inflows. In the Nifty Smallcap 100, NBCC, Delhivery, Dr Lal Pathlabs, and Godfrey Phillips emerged as favourites—pointing to rising interest in emerging themes.
● Top stock moves driven by banking allocations:
Banking names dominated fund additions in value terms, while stocks like Siemens, Infosys, and Voltas saw notable declines. The shift underlines fund managers’ tilt towards financially sound, growth-led stories in a period of selective bullishness.
April’s fund flows reveal a measured yet confident repositioning towards India’s structural growth sectors. As fund managers recalibrate portfolios, the tilt towards private banks, oil & gas, and mid-cap opportunities signals optimism grounded in fundamentals.
