Key mutual fund trends observed in November 2024

24 Dec 2024 , 10:35 AM

MUTUAL FUND BRIEFING – NOVEMBER 2024

The month of November 2024 saw overall mutual fund AUM rise to ₹68.08 Trillion. Unlike in October, the index correction did wipe out the flow effect. November was a month when the Nifty and Sensex closed with minor gains as the FPI outflows eased. November 2024 saw sharply lower flows into debt funds, equity funds, and alternates as the SIP Stoppage spike had a deep impact on the net flows into active and passive equities. Active equity funds saw monthly inflows lower by 14% at ₹35,944 Crore; compared to ₹41,887 Crore in October 2024. Average equity fund inflows of the last 6 months stood at ₹38,035 Crore.

KEY TRENDS IN MUTUAL FUNDS – SEGMENT LEVEL (NOVEMBER 2024)

Mutual fund segment level trends for November 2024 are confined to a macro level with focus on colour and direction of the flows into specific fund classes.

• Average assets under management (AAUM) of all mutual fund schemes, stood at ₹68.05 Trillion in November 2024; compared to ₹68.50 Trillion in October, ₹68.00 Trillion in September, ₹66.04 Trillion in August, ₹64.71 Trillion in July, and ₹61.33 Trillion in June 2024. On yoy basis, mutual fund AAUM was up 39.6% in November 2024.
• In the last couple of years, we have seen a steady but sure shift in the overall AUM mix from active debt to active equity. The share of active equity funds in AUM for November 2024 was down 70 bps from 60.3% to 59.7% MOM; but AUM share was up 480 bps yoy. In November, the equity fund share in AUM fell below 60% after 4 months.
• Passive fund share was 10 bps lower at 12.5% in November 2024 on MOM and 20 bps lower on yoy basis. The share of active debt funds was up 40 bps MOM from 14.4% to 14.8% in November 2024 while share is down 370 bps yoy. Liquid / money market funds share rose 30 bps from 12.7% to 13.0% MOM in November 2024 but down 100 bps yoy.
• There is a distinct shift in AUM share from institutional investors to individual investors. One reason could be the surge in SIP flows. Apart from the lure of financial planning, the falling yields on debt funds are pushing investors to equity fund SIPs. Between November 2023 and November 2024, the share of individual investors in the overall MF AUM composition has gone up 160 basis points from 59.2% to 60.8%.
• How much have individual investors allocated across various categories of mutual funds? As of November 2024, individual investors have a share of a mere 36% in active debt funds and just 12% in short term money market schemes. Individual investors have 88% market share of equity fund assets, but just 12% of passive fund AUM.
• What about the individual investor’s allocation basket. As of November 2024, individual investors have 87% of their mutual fund portfolio in active equity schemes and 9% in active debt funds. Liquid funds at 2% and ETFs at 2% are fairly small. Institutions and corporates have 29% of their corpus in liquid funds, 29% in ETFs / FOFs, 24% in longer active debt funds and just 18% in active equity funds.

As of the close of November 2024, overall assets of mutual funds in India (AAUM) has grown by 36.8% yoy. Assets of individual investors in this period grew by 43.5% while the growth in assets of institutional investors was a relatively modest 34.0%.

KEY TRENDS IN MUTUAL FUNDS – FOLIOS AND TICKET SIZES (NOVEMBER 2024)

Folios are investor accounts unique to an AMC and are a good barometer of retail intensity.

• There were total of 22.08 Crore folios as of the close of November 2024 of which retail investors accounted for nearly 91.5% of the total folios. In addition, HNIs accounted for 7.9% of the folios while institutions accounted for balance 0.6% of the folios. In case of active debt funds, retail investors account for 72.9% of the folios, while HNI investors account for 24.9%. HNIs also have a high share of folios of liquid funds (25.2%) and hybrid funds (24.1%); which is logical being a natural fit for HNIs.
• Between March 2009 and September 2014, mutual fund folios contracted from 4.76 Crore to 3.95 Crore due to persistent outflows from equity funds. However, between September 2014 and November 2024, the number of mutual fund folios have jumped from 3.95 Crore to 22.08 Crore. That is a jump of 459% in folios. Since Sep-14, folios have grown at CAGR (compounded annual growth rate) of 18.43%.
• There are two takeaways on folios and retail holding period. Let us look at average ticket size for equity and debt products. For equity funds (predominantly a retail product), the average ticket size is up 18% you at ₹2.11 Lakhs. In the case of debt funds, the average ticket size is up just 7% at ₹16.52 Lakhs. The net AUM of Indian mutual funds at ₹68.08 Trillion is spread across 22.08 Crore folios, giving a per folio ticket size of ₹3.08 Lakhs.
• Unlike the popular perception, retail investors are not myopic in their approach to equity funds. As per data for November 2024, retail investors hold 54.1% of equity fund assets for more than 2 years (lower over previous quarter).

The surge in individual investor share is linked to SIP flows and NFO flows. The higher stickiness is from the lessons learnt COVID, that persisting is the best idea in SIPs. Over time, the rupee cost averaging will ensure that you get more value when markets rise and more units when the markets fall.

KEY TRENDS IN MUTUAL FUNDS – GEOGRAPHICAL MIX (NOVEMBER 2024)

How are cities and towns contributing to the mutual fund growth story? We specifically look at the story of big cities versus small towns and emerging cities.

• The mutual fund market is divided into T30 (top-30) cities and B30 (cities beyond top-30). If you compare November 2024 with October 2024, T30 assets are down -0.53% at ₹55.61 Trillion. Total assets of B30 centres fell by -1.26% to ₹12.44 Trillion. If we only look at the share of individuals; then in November 2024, the B30 cities accounted for 27.04% of individual assets an increase of 3 bps over October 2024. This also meant that the share of individuals in the top-tier T-30 cities fell from 72.99% to 72.96%.
•  Despite the Direct route available since 2013, only 46% of the overall assets came through the Direct route, with just about 25% of retail investors 28% of HNIs investors coming through the direct route. Retail gains from Direct route is not yet visible.

Asset growth has slowed in the last 2-3 months and that can be attributed to market volatility. Hopefully, December should give a more unambiguous picture.