What’s driving the remarkable growth of India’s mutual fund industry?

financialexpress.com:

India’s mutual fund industry has witnessed remarkable growth, with assets nearing the 60-trillion rupee mark in May. The Association of Mutual Funds in India (AMFI) reported that the total assets under management (AUM) reached 58.6 trillion rupees ($701.90 billion), showcasing the fastest rise on record. This surge, adding 10 trillion rupees in less than a year, underscores the growing investor confidence and the resilience of the Indian financial market.

The journey of India’s mutual fund industry is nothing short of extraordinary. It took five decades to build the first 10 trillion rupees of assets since the industry’s inception in 1964. However, the recent pace of growth is unprecedented, with the last 9 trillion rupees added in less than six months. This rapid increase highlights the dynamic nature of the market and the increasing participation of investors.

One of the most significant contributors to this growth has been the inflows into equity mutual funds. In May, these inflows rose by an impressive 83% month-on-month, reaching 346.97 billion rupees. This surge indicates a strong investor preference for equity assets, particularly small- and mid-cap stocks. The robust performance of these segments has made them attractive options for investors seeking higher returns.

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May marked a milestone in net equity mutual fund inflows, reaching the highest levels since April 2019. This achievement is notable considering AMFI started reporting monthly mutual fund flows in the current format in 2019. Since February 2021, domestic equity mutual funds have consistently seen net inflows, aggregating to an impressive 5.58 trillion rupees. This