Amid volatility, large, mid-cap funds to see more inflows

The global equity market, including India, is witnessing heightened volatility at peak levels following escalating geopolitical risks and global uncertainty.

NEW DELHI: Amid growing volatility in the domestic equity market, large and mid-cap funds are likely to be a big draw among investors in the coming days, anticipates ICRA Analytics. It stated that the possibility of having a diversified portfolio coupled with good returns is attracting investors to such funds.

The global equity market, including India, is witnessing heightened volatility at peak levels following escalating geopolitical risks and global uncertainty. There are concerns about the valuation of equities listed in India, especially in the mid and small-cap segments.

Large and mid-cap funds have seen over five-fold growth in assets under management over last five years at Rs 2.57 lakh crore in July 2024, as against Rs 0.50 lakh crore in July 2019. The compound annualised returns on large and mid-cap funds are 44.07% for 1-year, 21.85% for 3-years, 23.67% for 5-years and 16.40% for 7-year period.

“Escalating geopolitical risks, worries over heightened valuations and uncertainty as to how the global interest rate cycle pans out in the coming months are some of the factors that may result in market volatility,” said Ashwini Kumar, Senior Vice-President and head market data, ICRA Analytics. Large and mid-cap funds may be a good investment choice if these funds have exposure to companies that have comparatively strong balance sheets, established businesses and stable earnings growth which can offer the much-needed stability.”

Net flows into large and mid-cap funds have increased by 276% at Rs 2,622.29 crore in July 2024, as against Rs 697.13 crore in July 2019.