Mid, smallcap mutual funds see surge in inflows. Is investor confidence making a comeback?

With midcap and smallcap funds seeing increased inflows in June, experts believe this surge reflects growing investor confidence in India’s long-term growth story, despite ongoing global uncertainties.

“The consistent rise in equity inflows, especially in mid and small-cap segments, reflects growing investor confidence in India’s long-term growth narrative despite global uncertainties. Equity mutual fund net inflows rose 24% month-on-month to ₹23,587 crore from ₹19,013 crore in May, led by strong demand in Flexi Cap, Small Cap, and Mid Cap categories,” said Ankur Punj MD and National Head Equirus Wealth.

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Midcap funds received an inflow of Rs 3,754 crore in June against an inflow of Rs 2,808 crore in May, registering a growth of 34% on a monthly basis. On the other hand, smallcap funds received an inflow of Rs 4,024 crore in June against an inflow of Rs 3,214 crore in May, witnessing a jump of 25% on the monthly basis.

“Broad-based market gains, including a surge in the Nifty 50 index and even stronger rallies in the mid- and small-cap indices, helped reignite interest in equity investments. Flows remained robust across categories, with flexi-cap, mid-cap, and small-cap funds attracting the highest investor interest. The inflows were driven by improved market sentiment, attractive valuations after recent corrections, and a portfolio reallocation toward equities amid subdued returns in other asset classes,” said Himanshu Srivastava – Associate Director- Manager Research, Morningstar Investment Research India

Another expert considers this surge in inflows as investors’ long-term conviction in the Indian markets.

“Categories like large-cap, mid-cap, smallcap and large & mid-cap Funds, also recorded impressive net inflows, reflecting investors’ long-term conviction in Indian markets,” said Gaurav Goyal, Head Sales and Marketing, Canara Robeco Asset Management Company.

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Midcap funds performance

In June, midcap mutual funds offered an average return of 4.74% and there were around 30 funds in the mid cap category which have marked their presence in the said time period. Out of 30 funds, Invesco India Midcap Fund offered the highest return of 7.13% in June. ICICI Pru Midcap Fund and Edelweiss Mid Cap Fund delivered a return of 6.18% and 6% respectively in June.

Canara Rob Mid Cap Fund and Mirae Asset Midcap Fund offered 5.43% returns each. Motilal Oswal Midcap Fund gave 4.95% return in the same time period. SBI Midcap Fund and Quant Mid Cap Fund gave 3.24% and 1.77% returns, respectively in June.

Smallcap funds performance

Smallcap funds have offered an average return of 4.24% in the month of June. There were 30 funds in the category in the said time period. UTI Small Cap Fund offered the highest return of around 6.48% in June, followed by Invesco India Smallcap Fund, which gave a 5.77% return in the same period.

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Mirae Asset Small Cap Fund and Aditya Birla SL Small Cap Fund gave 4.62% and 4.56% returns, respectively, in June. Nippon India Small Cap Fund, the largest smallcap fund based on assets managed, gave a return of 4.53% in June.

HDFC Small Cap Fund and Quant Small Cap Fund offered 4.22% and 4.04% returns, respectively, in June. Bank of India Small Cap Fund gave the lowest return of 2.74% in the same horizon.

Jatinder Pal Singh, CEO at ITI Mutual Fund, said, “We maintain a positive outlook on the Indian economy and believe that Indian equities are well-positioned for sustainable growth over the medium to long term.”