Investors flocked to large-cap oriented mutual funds with an influx of ₹1,287 crore in January, making it the highest fund infusion in 19 months, as a significant run-up in small and mid-caps prompted them to book profit. This is a huge turnaround following a net outflow of ₹281 crore in December. Also, the quantum was 80% higher than inflows of ₹716 crore in January last year.
The latest inflow helped push the asset base of the large-cap equity category by 26% to ₹3 lakh crore at January-end from ₹2.38 lakh crore a year ago. According to the latest data by the Association of Mutual Funds in India (Amfi), equity mutual funds focused on large-cap received inflow to the tune of ₹1,287 crore in January. This was the highest level since July 2022, when the category saw an inflow of ₹2,052 crore.
Given the significant run-up in small and mid caps, investors are booking some profits and rebalancing into large-caps, Kaustubh Belapurkar, Director – Manager Research at Morningstar Investment Research India, said.
Akhil Chaturvedi, Chief Business Officer, Motilal Oswal AMC, said,"Large- caps demonstrated positive contributions in January, reversing the net outflows experienced in December 2023. This shift in trend is in line with valuation differentials among large v/s mid and small caps, suggesting that large caps or flexi caps oriented schemes may attract higher flows in the future".
Before the outflow in December 2023, the category attracted ₹307 crore in November and ₹724 crore in October. Overall, equity schemes saw an inflow of ₹21,780 crore in January this year making it the highest monthly infusion in nearly two years. The latest flow was about 28% higher than inflows of ₹16,997 crore in December.
Besides, mid-cap oriented funds and small-cap focused funds continued to attract investors with inflows of ₹2,061 crore and ₹3,257 crore, respectively. Feroze Azeez, Deputy CEO, Anand Rathi Wealth Ltd, said that in FY2024, until December, the total outflow hovered around ₹4,949 crore from large-caps. During the same period, small-caps received inflows of ₹34,103 crore.
For FY2024, large-caps have delivered an absolute return of 28%, whereas small-caps delivered over 60%. Given that this would have created portfolio allocations biased towards mid and small as well as huge run-up in small relative to large, allocations moving towards large-cap is justified, he added.
"With mid-caps at 15% and small-caps at over 20% premiums, investors are realising the considerable valuation gap with the large-cap segment, and accordingly making adjustments to their investments," Gopal Kavalireddi, Vice President of Research at FYERS, said.
The growing interest in large-cap funds could be seen in the rising number of investor folios, both on a month-on-month and yearly basis. Year-on-year, folio numbers surged by over four lakh to 1.33 crore in January, while on a month-on-month basis, there was an increase of 1.45 lakh folios.
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