It’s no wonder, therefore, the share of domestic mutual funds in the overall institutional equity assets under management (AUM) reached a record high. Data from NSDL showed Indian domestic funds’ share of total institutional equity rose 224 basis points to 20.89% as of June 2024.
This increase is the highest among all institutional categories, marking the fifth consecutive month of expansion for local funds in total institutional equities.
The growth in mutual funds’ AUM is highlighted by the fact that the expansion in other institutional categories is only a fraction of mutual funds’ gains. Institutional funds currently hold approximately 44% of India’s total market capitalization, with promoters holding 51% and the remainder owned directly by retail investors.
The combined effect of capital appreciation and consistent inflows has driven the total equity portfolio of domestic mutual funds to a record high of ₹40.26 lakh crore in June 2024, reflecting a 57% year-on-year increase. Meanwhile, the total institutional equities portfolio increased by 40% to ₹192 lakh crore during the same period.
The benchmark index Nifty 50 delivered a 26% gain over the past year, indicating that the growth in the equity value of domestic funds’ AUM is driven by incremental monthly investments. The equity portfolio of domestic funds includes exposure across equity funds, balanced funds, ETFs, and index funds.Over the last 12 months, domestic funds have cumulatively invested ₹3.07 lakh crore, making them net buyers of equities for 17 consecutive months. In June 2024 alone, monthly investments by domestic funds reached ₹28,225 crore, marking the fourth consecutive month where investments exceeded ₹25,000 crore. Gross purchases by domestic mutual funds surged to a record high of ₹2.86 lakh crore in June 2024, mirroring similar momentum seen in foreign funds, which recorded gross purchases of ₹4.79 lakh crore.
Together, these two major institutional investors, accounting for 56% of total institutional equities, continue to increase their equity holdings, suggesting that the current momentum in equities may be sustained in the near term.
Furthermore, the higher monthly investments by domestic funds bode well for the upcoming monthly inflow readings by the Association of Mutual Funds of India, which are expected to be released in the coming days.