Investors' attention now shifts towards large-cap funds amidst rising market volatility

According to a BusinessLine report, investors have turned towards large-cap mutual fund schemes instead of mid-cap and small-cap funds due to increasing volatility and valuation concerns in the Indian stock market.

AMFI data shows that net equity inflow in October fell 14% month-on-month to ₹32,994 crore, compared to ₹38,307 crore in September. However, the large-cap category showed a contrary trend.

Investment in large-and-mid-cap funds nearly doubled to ₹8,484 crore from ₹4,271 crore in the previous month. Additionally, large-cap funds saw an investment of ₹1,032 crore, which is 20% more than September's ₹859 crore. Conversely, investment in small-cap funds fell 29% to ₹6,407 crore, and mid-cap funds saw a 36% decline to ₹4,980 crore.

Sougata Chatterjee, President and Deputy CEO of Nippon India Mutual Fund, stated that the continuous improvement in large-cap inflows is encouraging, especially as valuations have become relatively attractive. This indicates that investors are attempting to balance their exposure across market capitalisations.

Suranjana Bordokkhura, Head of Distribution and Strategic Alliance at Mira Asset Investment Managers (India), said that investors are rebalancing their portfolios rather than exiting equity entirely. In October, the share of small-cap and mid-cap funds in total equity inflow was approximately 34%, compared to approximately 57% in July. This is the lowest share in seven months. As investors are allocating across various categories instead of concentrating in a single segment, more investment was seen in large-cap and large-and-mid-cap funds.

Despite market volatility, SIP contributions remained strong. SIP inflow in October was ₹32,160 crore against ₹32,490 crore in September, while the number of contributing accounts saw a slight decrease to 10 crore. AMFI Chief Executive Venkat Chalasani stated that SIP inflow remaining above ₹32,000 crore shows that despite short-term market fluctuations, investor confidence in equity remains intact.

Navneet Munot, MD and CEO of HDFC AMC, said that Indian investors are now looking past short-term volatility and view it as part of the investment journey. Recent rallies have once again proven that time in the market is more important than timing the market.

The industry's total AUM rose slightly to ₹83.39 lakh crore last month from ₹82.64 lakh crore in September. On the other hand, debt funds recorded a net inflow of ₹1.13 lakh crore, whereas the previous month saw an outflow of ₹1.83 lakh crore.

AMFI is a non-profit organization that manages the mutual fund industry in India. It works for the regulation and development of mutual funds and provides market data and statistics.