Mutual Funds: Small, mid cap funds saw massive surge in folios in March

Although small cap mutual funds saw redemption in the month of March, the number of new mutual fund folios in this category hit a whopping 3,63,000 in the last month of FY2024, showed the AMFI data.

At the same time, new mutual funds’ folios in the mid cap category stood at 2,99,584. In the large cap funds, the number of new folios stood at 1,79,114.

As far as investment is concerned, small cap mutual funds saw an outflow of ₹94 crore in March, while mid-cap mutual funds received an inflow of ₹1,017 crore, and large cap received ₹2,127 crore during the same period.

(Source: AMFI)

As one can see in the table above, while investors redeemed their investment from small cap mutual funds, the number of new folios increased significantly in this category . This was followed by mid cap and large cap schemes.

Other categories

Besides small caps, other mutual fund categories which saw significant increase in their folios included flexi cap and ELSS funds.

Flexi cap mutual funds saw 2.56 lakh additional folios when it increased to 1.42 crore in March. Additionally, ELSS folios saw an increase of 2.53 lakh in March and value funds saw 1.71 lakh new folios.

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Meanwhile, flexi caps and ELSS funds received an inflow to the tune of ₹2,738 crore and ₹1,789 crore, respectively.

Notably, markets regulator Securities Exchange Board of India (Sebi) had told mutual fund houses to restrict inflow into small cap schemes in Feb 2024.

The small cap and midcap space remains expensive, say analysts and investors who are planning to invest should take a staggered approach.

“Overall, we continue to have a positive bias on the equity market. Valuations are relatively rich but we expect the premium to sustain based on expectations of improvement in corporate profitability and stable domestic macros and strong liquidity inflows. Many of the small cap and midcap stocks clearly are extremely expensive. Exposure to small cap and mid cap funds should be taken through staggered investments,” said ICICI Securities in a recent report.