Mid, smallcap fund inflows surge in September, largecaps see comeback. What does it hint?

Mid and smallcap funds saw a jump in monthly inflows in September, whereas large cap funds returned to inflows after witnessing outflows for two consecutive months, according to the latest data released by the Association of Mutual Funds in India (AMFI).

The data by AMFI showed that small cap mutual funds continued to attract the highest inflows for the third consecutive month, drawing a record Rs 9,038 crore in September. Midcap funds received the second highest inflows of Rs 7,834 crore in September.

Large cap funds, after witnessing outflows for two consecutive months, received an inflow of Rs 859 crore in September.


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Himanshu Srivastava, Principal, Manager Research, Morningstar Investment Research India, said together small and mid caps accounted for approximately 44% of total net equity inflows during September. The sustained interest in these categories, despite the correction in broader markets, suggests that investors continue to remain confident about the long-term growth potential of emerging businesses.

Srivastava further said that the continued concentration of flows into mid and smallcap categories warrants attention, particularly given valuation concerns in parts of the broader market.

How large, mid, and small caps performed in September?

The Nifty 50 TRI declined 5.93% in September, Nifty Midcap 150 TRI slipped 5.93% and the Nifty Smallcap 250 TRI was down 3.03%.

Largecap mutual funds on average lost 5.05% in September, with Franklin India Large Cap Fund losing the most at around 6.79% in the said time period. Taurus Large Cap Fund lost the lowest at around 1.81%. ICICI Pru Large Cap Fund, the largest large cap fund based on assets managed, lost 5.30%.

Mid cap funds on average lost 5.20%. Mahindra Manulife Mid Cap Fund lost the most at around 7.24%, whereas Taurus Mid Cap Fund lost the lowest at around 2.12%. HDFC Mid Cap Fund, the largest midcap fund based on assets managed, lost 6.73%.

Small cap funds on average lost 2.04% in September. Edelweiss Small Cap Fund lost 5.13%, while Quant Small Cap Fund lost the lowest at around 0.80%. Four small cap funds gave positive returns, with Samco Small Cap Fund delivering the highest return of 6.11% in the said time period.

Nirav Karkera, Head of Research and Fund Manager, W by Groww, said that strong flows into small and midcaps show investors are growing more comfortable with volatility and more confident in the riskier end of the market. Interest in largecaps is also returning. They offer a wider margin of safety today, and sectors like financial services, represented well in the pack, are garnering strong investor interest.

Another expert, Nitin Agrawal, CEO, Mutual Funds, InCred Money, said that the inflows in mid and small caps show the maturity of value buying across investor segments.

Also Read | Equity mutual fund inflows jump 31% MoM to Rs 38,306 crore in September; smallcap funds log record collection

Agrawal further said that largecap turned positive at Rs 859 crore for the first time in three months, leading to investors finding value entry points in quality largecap stocks. This is not momentum. This is capitulation buying into drawn-down valuations.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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