2024 mutual fund forecast: Unveiling trends, what lies ahead?

Mutual fund investment: SIPs have become the favoured choice for young investors in India, evident in the consistent rise of inflows. In 2023, SIP inflows grew by 22 per cent, showcasing an increase in the disposable income of young investors channelling into SIPs, driven by robust returns. As we approach 2024, experts and analysts are bullish on the sector's growth, anticipating the momentum to continue with a projected return of 25 per cent from mid-cap funds and 35 per cent from small-cap funds.

According to experts, aggressive funds also have the potential to yield up to 25 per cent. This outlook follows significant changes observed in mutual fund trends during 2023 compared to the preceding year, 2022. Multi-cap, sector funds, and flexi-cap funds saw substantial inflows, indicating heightened investor interest in these categories. Additionally, mid-cap and small-cap funds experienced consistent inflows. Conversely, large-cap funds and Equity-Linked Savings Schemes (ELSS) witnessed the lowest investor interest, with diminished inflows throughout the year, according to Fisdom data.

"In the context of expected market returns through SIPs, a reasonable expectation is around 15 per cent. For those seeking more aggressive growth, certain funds have the potential to deliver up to 25 per cent returns," Chahal Verma, Finance Advisor told Republic.

Aastha Gupta, CEO of Share India FinCap, and Amit Gupta, MD of SAG Infotech, echoed a similar sentiment  affirming the expected returns from the market.

Discussing conservative options, Gupta highlighted the PPFAS Flexicap Fund, known for its large-cap positions and exposure to the US market. Additionally, the Axis Bluechip Fund, with a focus on large-cap stocks, was mentioned as another stable choice. For those seeking more aggressive investment opportunities and aiming for higher returns, Verma suggested considering the Quant Small Cap Funds and Quant Midcap Funds.

Mutual fund trends: What changed?

Spotlight on emerging equities

Multi-cap momentum:

In November 2022, multi-cap equities stood at Rs 170, kicking off a positive trend in the market. The momentum continued throughout the year, reaching Rs 676 in December 2022 and a substantial Rs 1,773 in January 2023. However, February 2023 saw funds standing at Rs 1,977, accompanied by a notable decline to Rs 717 in March 2023. The market experienced volatility in the following months, with April and May showing a decline of Rs 206 and Rs 105, respectively. Fortunately, June 2023 witnessed a significant recovery, with multi-cap equities soaring to Rs 735 and reaching Rs 1,713 in November 2023.

Sectoral rollercoaster:

On the other hand, sectoral/thematic equities displayed a different trajectory. Starting at Rs 1,380 in November 2022, this category experienced fluctuations in the subsequent months. December 2022 saw a decrease to Rs 204, but a rebound occurred in January 2023, reaching Rs 903. The trend continued with substantial gains in February and March 2023, peaking at Rs 3,856 and Rs 3,929, respectively. However, the sectoral/thematic equities faced challenges in the following months, witnessing a dip to Rs -169 in May 2023. Despite this setback, the market rebounded, reaching Rs 459 in June 2023 and maintaining an upward trajectory through the rest of the period.

Flexi-cap fluctuations:

Flexi-cap equities starting at Rs 863 in November 2022 and reaching Rs 403 in December 2022. The trend continued with a rise to Rs 1,006 in January 2023 but faced a decline in the subsequent months, with February and March 2023 recording Rs 1,802 and Rs 1,107, respectively. The market experienced volatility with negative returns in April and May 2023, reaching Rs -368 and Rs -17, respectively. However, June 2023 saw a recovery with a surge to Rs 551. The fluctuation persisted with July and August 2023 displaying a decline to Rs -932 and reaching Rs 2,193, respectively. The market rebounded in September 2023, reaching Rs 1,354, and maintained a positive trajectory through the rest of the period, closing at Rs 1,668 in November 2023.

 

Steady equity: Consistent categories?

In the realm of consistent categories, large & midcap equities stood at Rs 593, setting the tone for a positive trend. This momentum continued into December 2022, reaching Rs 1,190, and further escalating to Rs 1,902 in January 2023. However, February 2023 saw a minor dip to Rs 1,651, and March 2023 marked a notable decline to Rs 1,619. Despite these fluctuations, the category demonstrated resilience, bouncing back to Rs 739 in April 2023. The positive trend continued through May, June, and July 2023, with values reaching Rs 1,133, Rs 1,147, and Rs 1,327, respectively. The category peaked in August 2023 at Rs 2,113, experiencing a slight dip in September to Rs 1,334 but recovering to Rs 1,734 in October. The trend culminated with a closing value of Rs 1,847 in November 2023 for Large & Midcap equities.

Mid-cap started at Rs 1,176 in November 2022, and the category surged to Rs 1,962 in December 2022. January 2023 witnessed a minor decline to Rs 1,628, but the market rebounded in February and March 2023, reaching Rs 1,817 and Rs 2,129, respectively. The trend continued with values fluctuating in the subsequent months, ultimately closing at Rs 2,666 in November 2023.

Small-cap equities demonstrated growth, starting at Rs 1,378 in November 2022 and progressively surging to Rs 2,245, Rs 2,256, and Rs 2,246 in December 2022, January 2023, and February 2023, respectively. The category faced a slight dip in March 2023 but rebounded significantly in the following months, reaching Rs 5,472 in June 2023. The positive momentum continued, closing at Rs 3,699 in November 2023.

Value/Contra equities commenced the journey at Rs 124 in November 2022, and the category experienced fluctuations throughout the period. Notably, Value/Contra equities reached Rs 2,239 in June 2023, contributing to the overall market dynamics. The category concluded the period at Rs 1,252 in November 2023, reflecting the nuanced movements within this segment of the equity market.

Hard-hit categories

Navigating the challenges in the equities market, several categories faced fluctuations during the period from November 2022 to November 2023. Large-cap equities encountered a tumultuous journey, starting at Rs 1,039 in November 2022 and facing a dip to - Rs 26 in December 2022. January 2023 marked a recovery to Rs 716, but volatility persisted with values fluctuating. March 2023 saw a notable decline to Rs 911, followed by a challenging phase reaching -Rs 2,050 in June 2023. The category exhibited resilience, concluding the period at Rs 307 in November 2023.

Dividend-focused equities faced their own set of challenges, opening at - Rs 123 in November 2022 and gradually moving towards a positive space. January 2023 marked a turnaround, reaching Rs 2, with notable gains in subsequent months. The category peaked at Rs 3,716 in March 2023, displaying robust growth. Despite a dip in August 2023, dividend-focused equities closed at Rs 173 in November 2023.

The Focused equities encountered fluctuations throughout the period, starting at -Rs 284 in November 2022 and reaching a positive phase in December. January 2023 witnessed further growth at Rs 183, but challenges emerged, leading to a dip in values in subsequent months. Notably, the category rebounded in June 2023, closing at Rs 1,018, but faced headwinds, concluding the period at Rs 143 in November 2023.

Equity-Linked Savings Scheme (ELSS) starting at -Rs 254 in November 2022 and experiencing substantial growth in December. January 2023 marked a notable surge to Rs 1,414, but challenges emerged in the following months. Despite facing negative values in June and July 2023, ELSS rebounded, closing at Rs 104 in November 2023, highlighting the resilience within this tax-saving equity category.