Smallcaps pull more retail money in January, gold ETFs shine bright, shows AMFI data: Top highlights

While small and midcap stocks have been in focus amongst market watchers, investors continued to gravitate towards small and midcap funds.

Net inflow into smallcap funds saw a healthy growth in January, AMFI data showed on February 12, at a time when valuation concerns are making investors jittery. Geopolitical uncertainty made more investors gravitate towards gold and debt in January, as investors hope for the global tariff spat to settle down soon.

Here is a quick summary of some of the key highlights from the AMFI data for January:

Smallcap Funds Continue to See Demand

While small and midcap stocks have been in focus over valuation concerns, investors continued to gravitate towards them, mutual fund flow data for January showed.

Inflows into smallcap funds grew 22.6 percent month-on-month to Rs 5,720.87 crore. Midcap funds saw a marginal rise in inflow at Rs 5,147.87 crore in January. Interest in largecap funds continued as flows surged 52.3 percent to Rs 3,063.33 crore.

“Mid and smallcap funds and categories which have significant exposure in these two segments continue to receive strong inflows, highlighting preference, largely driven by high returns that they have generated over last few years. Since both the segments witnessed sharp correction, investors would have chosen to make use of this opportunity and enhance their exposure to these segments,” Himanshu Srivastava, Associate Director and Manager - Research, Morningstar Investment Research India said.

Srivastava added that investors should be wary of inherent risk in these segments and be judicious, and their investment should be 'in line with their risk appetite'.

Equity Flows Stable

While equity inflows continued in January, a slight dip was seen owing to market volatility. Akhil Chaturvedi, Executive Director & Chief Business Officer, Motilal Oswal AMC said investor sentiment has been firm in a month that saw volatility and correction due to FII selling pressure.

"We have seen stable net flows of Rs 40,000 crore and a marginal decline in SIP block, which currently stands at Rs 26.4 lakh crore, against Rs 26.45 lakh crore in December 2024. Interestingly, there is a swing in allocations from thematic funds to asset allocations funds like BAAF and MAF, including largecap funds as a pure equity exposure," he added.

Himanshu Srivastava of Morningstar Investment Research said investors' focus towards making the most of the correction in January can also be gauged by the fact that around 30.7 lakhs new folios were added during the month.

Slight Dip in SIP Numbers

SIP flow for the month saw a marginal decline at Rs 26,400 crore in January. Venkat Chalasani, Chief Executive, AMFI said the industry has eliminated around 25 lakh SIP accounts after a reconciliation between RTAs and exchanges. "This resulted in the number of SIP outstanding accounts falling for the first time in recent years to 10.27 crore last month, against 10.32 crore in December.”

Suranjana Borthakur, Head of Distribution & Strategic Alliances, Mirae Asset Investment Managers (India) said SIP inflows are strong, and investors are committed to long-term wealth creation.

"During market corrections, SIP investors benefit by accumulating more units, reinforcing the importance of staying invested, rather than pausing or stopping SIPs. For investors with a horizon beyond three to five years, mid and smallcap funds - aligned with risk appetite - should continue to be part of a well-balanced portfolio,” she said.

Gold Shines Bright

Gold Exchange-Traded Fund (ETF) category witnessed the highest monthly net inflow ever in January, receiving Rs 3,751.42 crore.

Abhishek Tiwari, Executive Director & Chief Business Officer, PGIM INDIA MF said there has been a shift towards safe haven status of gold, given the geopolitical concerns. "Investors' preference is shifting towards protecting downside risk, which is why you are seeing traction in gold and multi-asset strategies," he added.

Debt the Better Bet?

While equities are facing valuation and earnings challenges, the debt market has remained stable. Debt mutual funds saw a net inflow of nearly Rs 1.29 lakh crore in January, against net outflow of Rs 1.27 lakh crore in December 2024.

Himanshu Srivastava of Morningstar Investment Research said he is not surprised at this.

"I think uncertainty in the equity market could have led investors to park some of their investment in debt, till they get clarity on equity. Normally, when you look at a month after the quarter-end month, there tends to be more flows in the debt segment," he added.