Top 5 Mutual Fund Trends to Watch in 2024

Data from the Association of Mutual Funds in India (AMFI) reveals that SIP contributions in mutual funds have been steadily increasing year-on-year since FY21, with the SIP investments in April 2024 alone amounting to Rs. 20,371 crore. This demonstrates that mutual funds have rapidly become one of the most popular investment options in India. With various benefits like curated portfolios, professional fund management and easy diversification, they help investors at various stages of their journeys achieve the goal of participating in the markets even without the necessary expertise.

As investors turn to mutual funds in growing numbers, a few key trends are defining this market segment in 2024.

5 Mutual Fund Trends to Watch in 2024

If you are planning to begin your mutual fund investment journey this year, or if you want to upgrade your existing mutual fund portfolio further, it helps to remain aware of the top mutual fund trends driving the Indian markets in 2024. Here are five recent developments to keep an eye out for.

1. Increased Retail Investor Participation
   Retail investors are driving stellar growth in the mutual fund industry, which was once dominated by large institutional investors alone. Thanks to small investors, the total assets under management (AUM) have grown over fivefold in the last 10 years and hit the Rs. 57 trillion mark in April 2024.
   Interestingly, retail investors are also showing a preference for longer holding periods. This is in stark contrast to non-retail investors, who favour non-equity funds and have shorter investment outlooks. As more retail investors aim for sustained investments, it may indicate that mutual funds are quickly becoming the ideal choice for investors who wish to fulfil various long-term financial milestones.
2. Rising Popularity of Index Funds and ETFs
   Another notable trend is the growing popularity of passive investment avenues like exchange-traded funds (ETFs) and index funds. The AUM of ETFs in the Indian markets has grown from a mere Rs. 351 crore in 2014 to Rs. 6.27 lakh crore in 2024. Index funds, which track a benchmark index, are also finding favour among investors and mutual fund houses, with many new funds in this category being launched in recent NFOs this year.
   For the average retail investor, passive funds like ETFs and index funds offer a wide range of benefits — including low investment costs, simplicity, professional fund management and relatively stable portfolios. With investors being increasingly drawn to these benefits and considering these investment options, mutual fund houses are also responding to the demand with new index fund launches.
3. Increasing SIP Contributions
   Thanks to their flexibility and the widespread availability of digital trading tools, Systematic Investments Plans (SIPs) have become the chosen investment mode for the vast majority of retail mutual fund investors. As data from the AMFI records reveals, SIP contributions have been steadily increasing month-on-month in 2024, from over Rs. 18,000 crore in January to over Rs. 20,000 crore in April.
   Factors like convenience, flexibility, rising financial literacy and a marked shift towards digital investment platforms have all been strong factors driving this trend. These numbers indicate a growing interest in mutual funds among retail investors. It also suggests that most individuals are adopting a disciplined approach to mutual fund investments instead of merely speculating in the markets.
4. Strong Preference for Equity Funds
   Previous generations of investors may have prioritised safer investment avenues. However, it appears that the modern retail investor in India is ready to tolerate higher risks if it improves the chances of earning better market-linked returns. This is evidenced by the simultaneous outflows from debt funds and inflows into equity funds in the Indian mutual fund market.
   In March 2024, even as debt funds recorded outflows exceeding Rs. 2 lakh crore, inflows into equity funds remained strong, with a monthly average of over Rs. 20,000 crore. This preference for equity funds indicates a growing appetite for higher-risk, higher-reward investments among retail investors. It also marks a shift towards goals like capital growth and wealth creation instead of mere capital protection.
5. Shift from Small-Cap to Mid-Cap and Large-Cap Funds
   Even among the equity mutual fund segment, retail investors seem to have their pick of favourite categories. Where small-cap funds were quite popular in the recent past, there has been a noticeable shift from this subcategory to large-cap (and large-cap and mid-cap) funds in 2024.
   In March 2024, small-cap funds recorded outflows to the tune of Rs. 94.17 crore and mid-cap investments dipped to Rs 1,017.60 crore from Rs 1,808.10 crore, while the large and mid-cap category saw inflows of Rs 3,215.50 crore. This shift can be traced back to various factors like regulatory changes (like stress tests for small-cap funds), valuation concerns and general market sentiment. However, AMFI data suggests that this may only be a temporary trend.

Trend Watch: Should You Incorporate These Trends in Your Investment Plan? 

Overall, the trends we are witnessing in 2024 suggest that the mutual fund market is thriving with retail investor activity. However, before you follow any trend, you need to ensure that it aligns with your overall financial goals and investment objectives. If you are not sure which trends to incorporate into your investment plan, consider consulting with a financial advisor to assess how these developments fit into your strategy.

Ready to watch your savings grow? Try our SIP Calculator today and unlock the potential of disciplined investing. Perfect for planning your financial future. Start now!