Smallcap, midcap funds attract higher inflows in August; largecap outflows continue for second month

Smallcap and midcap mutual funds saw stronger investor interest in August, while largecap funds continued to witness outflows for the second consecutive month, according to the latest data released by the Association of Mutual Funds in India (AMFI).

AMFI data showed that smallcap funds received the highest inflow at Rs 7,973 crore, marking the highest-ever inflow in the category. In July, the smallcap category received an inflow of Rs 7,767 crore, marking a 3% jump month-on-month.

Also Read | Mutual fund SIP inflows hit record high of Rs 32,297 crore in August



Midcap funds received an inflow of Rs 6,989 crore in August compared to Rs 7,767 crore in July, marking a 13% jump. On the other hand, largecap funds saw an outflow of Rs 1,147 crore in August and Rs 1,321 crore in July. The outflow in July was the first outflow in the last 30 months in the largecap category. The largecap category saw its last outflow in December 2023, amounting to Rs 280 crore.

Himanshu Srivastava, Principal, Manager Research, Morningstar Investment Research India, said this coincided with relative strength in the broader markets during August, with mid- and small-cap indices outperforming the largecap benchmarks.

The persistence of strong flows into these categories suggests that investors continue to remain confident about the long-term growth potential of emerging businesses, notwithstanding elevated valuations in parts of the market. At the same time, investors need to remain mindful of the inherently higher volatility associated with these segments, Srivastava further said.

The shift in flows came amid divergent market performance across market-cap segments during the month. The Nifty 50 TRI declined 1.13% in August, while the Nifty Midcap 150 TRI gained 1.79% and the Nifty Smallcap 250 TRI rose 2.61%.

Commenting on continued outflows from the large-cap category, Srivastava said redemptions eased to Rs 1,147 crore in August from Rs 1,322 crore in July. Despite weakness in large-cap indices, investors continued to favour diversified categories and segments offering stronger growth potential.

How did large caps, mid caps and small caps perform in August?

Smallcap funds led the performance chart, giving an average return of 4.46% in August. There were 36 smallcap funds in the said time period, of which Samco Small Cap Fund gave the highest return of around 7.47%, followed by Groww Small Cap Fund, which returned 7.26%.

HDFC Small Cap Fund gave the lowest return of 0.05%. Nippon India Small Cap Fund, the largest smallcap fund based on assets managed, delivered a return of 3.63% in August.

Also Read | August AMFI Data: Equity mutual fund inflows rise 19% MoM to Rs 29,328 cr; smallcap inflows hit Rs 7,973 cr


Midcap funds delivered an average return of 3.02% in August. There were 33 midcap funds during that period; HSBC Midcap Fund gave the highest return of around 6.77%. Quant Mid Cap Fund gave the lowest return of around 0.21%.

Largecap funds on average gave a return of 0.04%. There were 34 large cap funds, of which Invesco India Largecap Fund gave the highest return of 1.84% and DSP Large Cap Fund lost the most of around 1.68%.

Rohit Sarin, Co-Founder, Client Associates, said investors aren't getting rattled by short-term market swings. They're playing the long game and still hunting for opportunities across different corners of the market.

Suranjana Borthakhur, Head of Distribution & Strategic Alliances, Mirae Asset Investment Managers (India), said that while large caps saw outflows for the second consecutive month, mid and small caps continued to strengthen, supported by steady SIP flows and a growing sense of conviction among distributors. This is also reflected in earnings trends, with mid and small caps seeing more upgrades and better representation from faster-growing parts of the economy, especially as BFSI and IT — the more large-cap-heavy sectors — have delivered relatively tepid returns.

(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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