Equity mutual fund (MF) schemes were flush with cash at the start of this month, even as fresh investments shrank in February. As of February 28, equity schemes from the top 20 fund houses held 6.8 per cent of their portfolios in cash, up from 6.1 per cent in January and 5.9 per cent in December 2024, according to a report by Motilal Oswal Financial Services.
Inflows into equity mutual fund (MF) schemes declined in May, logging their lowest tally in 13 months at Rs 19,013 crore. It came even as the gross systematic investment plan (SIP) inflows surged to a record high of Rs 26,688 crore.
'We continue to view India as a standout within EM.'
'Entering India is exciting, but it's also challenging. You have to be prepared for long-term investment.'
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Largecap, flexicap, and balanced advantage funds together recorded a net inflow of Rs 9,363 crore in August, representing a 70% increase from the previous month's total.
Inflows into equity mutual fund (MF) schemes declined for a fourth consecutive month in April, even as systematic investment plan (SIP) inflows reached a record high of about Rs 26,632 crore.
Since November 2022, sectoral, midcap, and smallcap funds have collectively added nearly 39 million folios, which is 65 per cent of the total additions to equity funds over the past two years.
Indian equity benchmarks rose nearly 2 per cent on Thursday, capping a truncated trading week with their strongest weekly performance in over four years. The rally was sparked by renewed risk-on sentiment following progress in trade negotiations and expanded tariff exemptions.
The share of investments held by the top 10 investors across smallcap mutual fund schemes has been on a decline, falling to a 14-month low in March 2025, shows an analysis of data from the Association of Mutual Funds in India (Amfi). The median smallcap scheme has 2.03 per cent of its investments coming from the top 10 investors, compared to 2.43 per cent a year ago.
Geopolitical developments between India and Pakistan, quarterly earnings and macro data will be the key drivers of stock markets in the holiday-shortened week, say analysts.
Small and midcaps are leading the charge in the latest market rebound. Since November 21, when the benchmark S&P BSE Sensex and the National Stock Exchange Nifty hit their recent lows and slipped into correction territory, the Nifty Smallcap 100 index has risen by 8 per cent, while the Nifty Midcap 100 has gained 5.7 per cent. Meanwhile, the Nifty 50 index has risen by 4.7 per cent during this period.
Midcap stocks Hero MotoCorp, Zydus Lifesciences, JSW Energy, NHPC, Bharat Heavy Electricals, Bosch, and Samvardhana Motherson are expected to earn upgrades.
Retail investors have been the hardest hit in the recent market downturn, with stocks where they hold over 20% falling 45% from their 52-week highs.
Domestic benchmark equity indices may see a positive trading sentiment on Friday thanks to a spectacular rally in world markets after the US President Donald Trump announced to put tariff hikes on hold for 90 days, excluding China from the reprieve. Indian stock markets were closed on Thursday for Shri Mahavir Jayanti. Trump has declared a three-month pause on reciprocal tariffs on non-retaliating countries marking a rather unexpected U-turn after record high levies he imposed led to global stock market meltdown.
Younger investors with long investment horizons may continue their SIPs.
'As the markets are expected to remain jittery in the near term, we advise investors to use this opportunity to enter quality largecaps from a long-term perspective.'
The top 100 companies have accounted for 63% of the gains (Rs 51 trillion out of Rs 81 trillion), while firms beyond the top 100 have contributed 37 per cent (Rs 30 trillion).
From the 30-share Sensex pack, Tata Consultancy Services, Titan, Infosys, Bharti Airtel, Bajaj Finance, ICICI Bank, HCL Technologies, and Tech Mahindra were the biggest gainers. NTPC and Asian Paints were the laggards.
Active equity mutual fund schemes have improved their showing across key categories over the past three months vis-a-vis their benchmarks.
After a strong run in the midcap and smallcap indices, which surged 46 per cent and 43 per cent, respectively, on the National Stock Exchange (NSE) during Samvat 2080, analysts suggest that the rally in these segments may pause to catch its breath in Samvat 2081.
'Expect FPIs to continue selling for several months until the rupee stabilises.'
'Even if India is attractive, FPIs currently lack the funds to invest, as money is being redirected to the US.'
Stopping SIPs during a downturn undermines the benefit of rupee-cost averaging.
'The market's sharp decline recently has shaken the confidence of retail investors, leading to increased selling.'
'...you evaluate three key factors before committing your money.'
'Over the next 12 months, it will be difficult to make 15 to 20 per cent return in the markets as the valuations appear stretched.'
The Securities and Exchange Board of India (Sebi) is reviewing the current stock categorisation framework followed by actively managed equity mutual funds (MFs) to ensure they are true-to-label. Individuals familiar with the matter said the universe of largecap and midcap stocks could be expanded by 25-50 stocks. The move follows concerns raised by industry players that the current threshold has been skewed following a sharp run-up in the domestic markets after the Covid-19 pandemic.
The cash pile within smallcap mutual fund (MF) schemes has grown over the past few months amid a relentless rally in stocks in this space. While fund managers usually don't make cash calls, incessant inflows and valuation discomfort have forced their hand. At the end of January, the top 10 schemes had over Rs 12,160 crore in cash, compared to Rs 8,700 crore in August 2023.
Investors should use a mix of active and passive funds.
The bias for the BSE benchmark index, technical charts suggest, is likely to remain bullish as long as the index holds above 75,600 levels for the rest of the year.
'Exposure to small and midcap stocks exceeded desired levels in many portfolios, prompting rebalancing.'
'While investors need to be prepared for making some losses, they should not lose big money chasing euphoria amid fear of missing out.'
Active largecap funds, which have the toughest job in terms of outperforming the benchmark, did better in 2023 as their bets in the mid and smallcap stocks paid off.
The stocks are largely from sectors such as chemicals, finance and cement, which struggled earlier but the worse seems to be behind them.
Investors keen on mid and smallcap stocks but wary of volatility should consider multicap equity schemes over standalone midcap or smallcap schemes.
'2025 is the year to build a portfolio for the future. Focus this year should be on valuations and visible growth.'
Dr Reddy's Laboratories (DRL) share price plunged 6.66 per cent to Rs 1,203.50 per share on the NSE during Friday after analysts remained cautious on the company's Q3 performance and differed on its growth outlook. DRL's Q3 performance was viewed as subdued by some analysts when they adjusted it for one-time grants and incomes that the company received during the quarter.
Domestic institutional investors pumped Rs 2.3 trillion into equities during H1 CY24. Of this, mutual funds contributed 80%.
Smallcap mutual funds recorded net outflows for the first time in 30 months in March as investors pulled out money after the markets regulator, the Securities and Exchange Board of India (Sebi), warned against "froth" in the mid and smallcap space. Active equity mutual fund (MF) schemes raked in Rs 22,600 crore in March. The March inflow is 16 per cent lower than the two-year high inflow of Rs 26,860 crore in February, shows data from the Association of MFs in India (Amfi).
