As 2024 draws to a close, the mutual fund industry reflects on a year of changing investor preferences, notable inflows, and emerging trends. While some funds surged ahead, others struggled to gain traction amidst shifting market dynamics. Here’s a detailed analysis of the year’s key highlights in the mutual fund industry.
Spotlight on Sectoral and Thematic Funds
In 2024, sectoral and thematic funds emerged as the most preferred investment category. These funds garnered 28% of total inflows, which means that out of every ₹100 invested in mutual funds, ₹28 was directed toward these specialized funds, and according to data from Value Research, sectoral and thematic funds recorded net inflows of ₹1,38,960 crore, marking them as the frontrunners of the year.
Index funds and ETFs trailed closely behind, attracting a robust ₹1,26,450 crore. Their passive investment approach, offering lower expense ratios and diversified exposure, appealed to many investors.
Other categories also performed well:
- Multi Cap Funds: ₹38,770 crore
- Flexi Cap Funds: ₹37,980 crore
- Large & MidCap Funds: ₹37,250 crore
These categories remain popular among investors seeking diversified exposure across market segments.
Top-Performing Mutual Funds of 2024
Several funds stood out this year, demonstrating exceptional performance and attracting significant investor interest.
- Parag Parikh Flexi Cap Fund emerged as the top performer, with inflows of ₹20,020 crore.
- SBI Contra Fund followed closely with inflows of ₹15,630 crore.
- Nippon India ETF Nifty 50 BeES recorded inflows of ₹14,210 crore.
Newly launched funds also made their mark:
- HDFC Manufacturing Fund was a standout NFO, raising a significant ₹9,560 crore.
- SBI Energy Opportunities Fund and ICICI Prudential Energy Opportunities Fund, launched this year, gained notable traction.
Other consistent performers included:
- Motilal Oswal Midcap Fund
- Nippon India Large Cap Fund
- Quant Small Cap Fund
- ICICI Prudential Nifty 50 ETF
The Motilal Oswal Flexi Cap Fund also staged a remarkable comeback, delivering a 50% return, outperforming the benchmark BSE 500 TRI’s 21% growth.
Funds That Struggled in 2024
While many funds thrived, others faced challenges:
- Focused Funds saw the highest outflows among all categories.
- Equity Linked Savings Scheme (ELSS) funds recorded modest net inflows of just ₹2,560 crore.
- Solution-oriented funds aimed at retirement and children’s savings attracted lower inflows, with only ₹1,530 crore and ₹80 crore, respectively.
The CPSE ETF, a PSU-focused thematic fund, saw significant outflows despite delivering 32% returns in 2024 and 75% in 2023.
A Year of Innovation: The NFO Boom
The mutual fund industry saw an impressive 154 new fund offerings (NFOs) in 2024, 90 of which were passive funds. These NFOs collectively raised ₹96,550 crore, reflecting strong investor interest in innovative and diversified investment products.
The HDFC Manufacturing Fund led the pack, raising ₹9,560 crore, accounting for nearly 10% of the total NFO inflows.
Challenges Faced by Axis Mutual Fund
This year, Axis Mutual Fund struggled, with three schemes—Axis Bluechip Fund, Axis ELSS Tax Saver Fund, and Axis Focused 25 Fund—remaining among the worst performers. These funds saw notable outflows totaling around ₹11,730 crore.
Although these schemes have shown some improvement, moving out of the bottom quartile they occupied in 2023, they have not yet regained investor trust.
The Underperformance of Concentrated Funds
Concentrated funds, which aim to deliver strong returns through a focused selection of stocks, also underperformed. Funds like:
- Mirae Focused Fund
- SBI Focused Fund
- Axis Focused Fund
…consistently ranked poorly, struggling to meet investor expectations.
Future Outlook
The mutual fund industry in 2024 has demonstrated both resilience and adaptability, catering to evolving investor preferences. The industry is poised for continued growth, with sectoral and thematic funds leading the charge and innovative NFOs capturing attention. However, the underperformance of specific categories and schemes serves as a reminder of the importance of informed and diversified investment strategies.
As we step into 2025, investors can look forward to new opportunities, and fund houses will undoubtedly strive to enhance their offerings to meet the dynamic needs of the market.