Equity Mutual Fund Inflows Reach 4 Lakh Crore in 2024; Volatility Brings Concerns for 2025
Equity mutual fund inflows jump to nearly Rs. 4 lakh crore in 2024, more than double the previous year’s Rs. 1.61 lakh crore. Strong confidence among investors and a shift toward long-term investing and greater popularity in the systematic investment plan are responsible for the sharp increase.
By December 2024, the total assets managed by mutual funds are expected to reach Rs. 30.57 lakh crore, up from Rs. 21.8 lakh crore in 2023. This is a 40 percent increase, thanks to better market awareness, improved digital tools for investing, and steady market growth, making equity mutual funds more easy to access to retail investors.
Retail investors are sticking it out even after the highs and lows in the market. Themes occupy the top-most position among equity funds, which received Rs. 1.55 lakh crore in 2024. Midcap and small-cap funds attracted investments of Rs. 32,465 crore and Rs. 34,223 crore, respectively. Large-cap funds received Rs.19,415 crore in inflows.
SIPs (Systematic Investment Plans) play a big role in this growth, with total contributions expected to reach Rs. 2.5 lakh crore in 2024. Monthly SIP contributions hit a record high of Rs. 26,459 crore in December, as more people choose this simple and steady way of investing. The number of investment accounts, or folios, also rises by 4.45 crore, bringing the total to 15.75 crore by the end of 2024.
The financial landscape in India is changing, with more and more households gradually drifting toward equity and equity mutual funds. Equity and equity mutual funds have been rising from 5.3 percent in March 2014 to 16.4 percent by September 2024, while the usage of traditional savings instruments has decreased, such as small savings schemes and deposits from 38.8 percent in March 2014 to 32.6 percent in September 2024.
Although the performance for 2024 has been stellar, the prospects for 2025 are a bit cautious. The inflows into equity funds have slowed since early December, owing to increased market volatility. Equity fund flows historically track the market well and periods of uncertainty usually discourage investor activity. Therefore, in 2025, there might be fewer new funds launched, and less money could flow into equity funds, especially if the markets remain unstable.
Even so, long-term investors are expected to gain from the ability of equity markets to grow wealth once things settle down. A rather fairly valued market with strong potential earnings and growing financial awareness will continue to remain drivers for wealth creation and financial inclusion over the next few years.
It would be the second year of significant growth for the mutual fund industry since 2024 marks the maturity of Indian investors and increasing participation in equity markets. Although the long-term trajectory seems promising, challenges are bound to arise in the year 2025.
