MutualFunds – Banking-Themed Schemes Dominate May Returns and Investor Interest
MutualFunds – Banking and financial sector-focused mutual funds emerged as one of the strongest performers in May, delivering solid returns while also attracting significant investor participation. According to a report released by Vallum Capital, Banking, Financial Services and Insurance (BFSI) thematic funds generated a return of 5.5 percent during the month and received net investments worth Rs 1,013 crore.
The report highlighted that the strong presence of large-cap banking and financial companies within these schemes played a major role in supporting their performance.
Micro-Cap Funds Deliver Strongest Returns
An interesting trend was observed in the micro-cap segment, which recorded the highest monthly gains among major categories. These funds posted returns of 5.7 percent in May, outperforming several other segments.
Despite delivering superior returns, micro-cap schemes did not witness a corresponding rise in investor inflows. In contrast, small-cap funds generated a return of 3.4 percent and attracted investments totaling Rs 2,229 crore, reflecting continued investor confidence in the segment.
Large-Cap Funds Continue to Attract Capital
Large-cap mutual funds reported the weakest return among market-cap categories, delivering only 1.5 percent during the month. However, investor interest remained exceptionally strong.
These schemes received net inflows of Rs 8,565 crore, substantially higher than both small-cap and mid-cap categories. The figures indicate that investors continue to prefer larger and more established companies despite lower short-term returns.
Mid-cap funds delivered gains of 1.6 percent and attracted Rs 3,898 crore in fresh investments. Meanwhile, flexi-cap funds generated returns of 2.1 percent and collected Rs 5,350 crore. Large and Mid-cap funds posted returns of 1.9 percent while receiving inflows of Rs 2,617 crore.
Automated Investments Influence Fund Flows
According to the report, systematic investment plans and other automated investment mechanisms continue to direct a large portion of retail savings toward large-cap and flexi-cap categories.
These investment routes typically channel money into highly liquid and established companies regardless of which market segment delivers the strongest monthly performance. As a result, large-cap funds continue to attract substantial investments even during periods when smaller categories outperform them.
The report noted that large-cap funds remain the biggest segment in terms of assets under management, accounting for more than Rs 10.5 lakh crore.
Mutual Fund Industry Maintains Growth Momentum
India’s mutual fund industry remained on a strong footing at the end of May, with total assets standing at Rs 81.58 lakh crore.
Systematic Investment Plan (SIP) contributions reached Rs 30,954 crore during the month, representing a 16 percent increase compared to the same period last year. Active SIP accounts also remained robust at 9.64 crore.
Equity mutual funds continued their long-running growth streak, recording net positive inflows for the 63rd consecutive month, underscoring sustained participation from domestic investors.
Domestic Institutions Counter Foreign Selling
Market activity during the month reflected contrasting investment behaviour between foreign and domestic institutions.
Foreign Institutional Investors (FIIs) sold equities worth Rs 32,963 crore. However, Domestic Institutional Investors (DIIs) remained active buyers, purchasing shares valued at Rs 82,165 crore, helping support market stability.
Banking Funds Lead Sectoral Performance
Among sector-specific schemes, PSU Bank funds delivered the strongest returns, rising 6.9 percent while attracting inflows of Rs 436 crore.
Private Bank funds also posted impressive gains of 6.5 percent and received Rs 329 crore in fresh investments. Together, both banking-focused categories brought in a combined Rs 765 crore from investors.
Transportation and logistics funds generated returns of 4.4 percent and attracted Rs 194 crore in inflows. Auto sector funds also performed well, recording gains of 4.2 percent during the month.