The mutual fund industry's assets under management have more than doubled from around ₹40 lakh crore to ₹85 lakh crore over the last five years, according to reports from Mint. During this period, individual scheme AUMs have also increased significantly, with some schemes growing so large that questions are being raised about whether their size will impact returns. The growth has been driven by the 'Mutual Funds Sahi Hai' campaign, which has created awareness among retail investors and led to sustained SIP investment numbers.
The ICICI Prudential Large Cap Fund leads the large-cap category with an AUM of ₹80,960 crore, as reported by Value Research Online. The scheme delivered 0.76% returns in the last year, lagging the category average of 6.85% and the BSE 100 TRI performance of 2.47%. However, over longer periods, the fund consistently outperformed with 13.15% returns over three years, 12.92% over five years, and 14.02% over ten years, compared to category averages of 12.07%, 10.24%, and 11.68% respectively.
In the mid-cap segment, the HDFC Mid Cap Fund dominates with an AUM of ₹1,05,143 crore, achieving 12.23% returns in the last year and 20.36% over three years, according to Value Research Online. The small-cap category is led by the Nippon India Small Cap Fund with an AUM of ₹78,957 crore, delivering 12.85% returns in the last year and 20.25% over five years. The flexi-cap category is topped by the Parag Parikh Flexi Cap Fund with an AUM of ₹1,48,429 crore, though it underperformed in the last year with -0.60% returns.
According to the analysis by Mint, large-cap funds can absorb higher inflows as money can be deployed in large-cap stocks with higher market capitalisation and liquidity. However, mid- and small-cap funds face challenges due to lower market capitalisation and liquidity of their underlying stocks. The report suggests that for small-cap funds, deploying AUM beyond a certain point becomes challenging, requiring higher diversification than required or maintaining higher cash levels, which may impact performance. This is evident in the Nippon India Small Cap Fund's case, where fresh subscriptions were stopped from July 7, 2023, with SIP limits reduced from ₹5 lakh to ₹50,000 per day per PAN from March 22, 2024.
