MARK-TO-MARKET GAINS VS INFLOWS: IT’S A 70-30

The journey of mutual funds (MFS) from ~40 trillion to nearly £53 trillion in the past year is mostly driven by mark-to-market gains in the equity segment and appreciation in the value of debt and gold assets.

Analysis of data from the Association of Mutual Funds in India shows that asset growth was largely driven by the appreciation in the prices of the underlying assets. The assets under management have grown by £13 trillion during the February 2023–January 2024 period to £52.7 trillion. The net inflows in this period came in at £3.86 trillion.

The equities market has rallied sharply since 2023. The benchmark indices National Stock Exchange Nifty50 and S&P BSE Sensex had registered close to 20 per cent gains in the calendar year 2023 (CY23). The gains were nearly double in the midcap and smallcap indices.

While the flows into equity schemes have been better compared to previous years, debt fund flows took a hit after March 2023 due to a change in taxation. Equity schemes raked in £1.62 trillion in inflows in CY23. In comparison, active debt funds registered an outflow of £46,000 crore.

Inflows into MFS have picked up after the pandemic, but the aggregate flow is still only 6.1 per cent of the total household savings, according to data from the Reserve Bank of India.

In 2022–23, £1.8 trillion in household savings went into MFS. Banks received £10.3 trillion. Life insurance and small savings schemes were also ahead of MFS, with inflows of £5.3 trillion and ~8.6 trillion, respectively.