Large mutual funds book profit of Rs 1,287 crore in January

Investors piled into large-cap-oriented mutual funds, which saw inflows of Rs 1,287 crore in January, the highest in 19 months, as sharp gains in small and mid-cap stocks prompted them to book profits. This is a huge turnaround after a net outflow of Rs 281 crore in December. Moreover, this amount is 80% higher than the Rs 716 crore inflow in January last year.

The latest inflows pushed the asset base of the large-cap category up 26% to Rs 300 crore at end-January from Rs 238 crore a year ago. Equity mutual funds focusing on large-cap stocks received inflows of Rs 1,287 crore in January, the latest data from the Association of Mutual Funds of India (Amfi) showed. This is the highest level since July 2022, when the category saw inflows of Rs 2,052 crore.

Kaustubh Belapurkar, research manager at Morningstar Investment Research India, said investors are booking some profits and rebalancing to large-caps given the sharp gains in mid- and small-cap stocks. Akhil Chaturvedi, chief commercial officer, Motilal Oswal AMC, said: “Large caps showed positive contribution in January, reversing the net outflows experienced in December 2023. This shift in trend is in line with valuations between large caps and mid and small caps. The value difference is consistent with caps, suggesting that plans with a broad-cap or flexible cap orientation may attract higher traffic in the future.”

The category attracted Rs 307 crore in November and Rs 724 crore in October before outflows in December 2023. Overall, equity schemes saw inflows of Rs 21,780 crore in January this year, the highest monthly inflow in nearly two years. The latest inflows were about 28% higher than the Rs 16,997 crore inflows in December.

Additionally, midcap funds and smallcap funds continued to attract investors, with inflows of Rs 2,061 crore and Rs 3,257 crore respectively. Feroze Azeez, deputy chief executive officer of Anand Rathi Wealth Ltd, said that in fiscal 2024, total outflows from large-cap stocks hovered around Rs 4,949 crore as of December. During the same period, small-cap stocks received inflows of Rs 34,103 crore.

In fiscal 2024, the absolute return for large-cap stocks was 28%, while the absolute return for small-cap stocks was over 60%. He added that a shift in allocation towards large-cap stocks is justified given that this will result in a portfolio allocation towards small and mid-caps and a significant upside in small caps relative to large caps. “With mid-caps trading at a premium of 15% and small-caps trading at a premium of more than 20%, investors are realizing the huge valuation gap to large-caps and adjusting their investments accordingly,” said Gopal Kavalireddi, vice president of research, in Fayes.

The growing interest in large-cap funds can be seen in the increase in investor portfolio numbers, both quarter-on-quarter and year-over-year. The number of facing pages in January increased by more than 400,000 pages year-on-year to 1.33 billion rupees, an increase of 145,000 pages month-on-month.

(This story has not been edited by News18 staff and is published from associated news agency – PTI)