4 Main Conclusions from Mutual Fund Data of January 2025

Against redemption pressure fears and stoppage of systematic investment plans (SIPs) midway in mid and small-cap schemes, numbers by the Association of Mutual Funds in India (AMFI) for January 2025 paint a stable picture. Market players had credited the latest correction in large-cap markets to panic selling by these stocks, but statistics report otherwise. Read on to discover the main takeaways from mutual fund data of January 2025 and the way ahead.

1. Rising Flows to Mid and Small-Cap Funds

Inflows into small-cap funds were higher in January at Rs.5,721 crore from Rs.4,688 crore in December. Mid-cap funds also saw higher inflows, at Rs.5,148 crore from Rs.5,093 crore in the earlier month. Early flow patterns in February also reflect stability, with no sharp fall in numbers. Investors are still purchasing during downswings in the market, and no huge redemptions have been noted.

2. No Stoppage of SIPs

The AMFI figures validate that systematic investment plans are robust, with 56,18,831 new SIP accounts opened in January. The SIP assets under management (AUM) are Rs.13,19,852.65 crore. While the SIP contribution in January, at Rs.26,400.21 crore, was marginally lower than December’s Rs.26,459 crore, it is consistent at about Rs.26,000 crore for the second month in a row. Market observers feel that even though mid and small-cap stocks saw corrections, mutual fund investors have not stopped their SIPs or created redemption pressure.

3. No Panic in the Market Observed

The SIP accounts numbered 10,26,88,854 in January, which was in line with the last month. This stability in SIPs is contrary to fears of redemptions on a large scale. Recent volatility in small and mid-cap stocks seems to be driven by other market players than mutual fund investors.

4. Mid and Small-Cap Funds Continue Cash Positions

Although fears of extended valuations in some pockets still linger, recent correction has brought about more realistic prices in some stocks.

Fund managers are holding cash buffers in mid and small-cap funds, hoping for better entry points in the next couple of months. For the near term, large-cap and flexi-cap funds are suggested, whereas mid-cap exposure could rise once market worries fade away. From a long-term perspective, mid-caps continue to be seen as a crucial growth driver for India’s equity market.

Investment Horizon

A crucial factor in the midst of SIP performance discussions, investment timeframes are highlighted by industry experts. Most new investors who entered the market in the last three to five years have seen mostly positive returns and are now experiencing market volatility. Although short-term volatility is unavoidable, past data indicates that long-term investment in mutual funds has a tendency to provide better compounded returns than other asset classes.

The mutual fund figures of January 2025 reflect the strength of SIP investments and unabated faith in mid and small-cap schemes in the face of recent market corrections. In the face of short-term volatility, long-term investors are urged to remain steadfast in their approaches, with judicious allocation depending on individual risk profiles and investment horizons.