Equity investments are one of the most desired avenues for investors. Its returns and exposure can help investors grow their funds in the long term. However, direct equity market exposure may be a little risky for retail investors due to its volatility.
Therefore, equity mutual funds in India are gradually taking the limelight. They help get indirect market exposure with the benefits of mutual funds such as Systematic Investment Plans (SIPs), diverse exposure and low cost. Investors are getting accustomed to these benefits and seeking mutual fund investments.
This fact is evident in the performance of equity funds in 2024. The equity market returns were moderate in 2024. However, the Asset Under Management (AUM) of equity mutual funds has surged by 40%. Moreover, it now contributes nearly 46% to the total AUM of the industry.
Investors can explore its growth drivers, understand the pattern and strategise their investments accordingly.
Growth of equity funds in India
In modern times, people are becoming aware of the significance of investing. It has surged their desire to invest in equity markets. Moreover, mutual funds have also gained significant popularity in recent years due to their simple process and facilities.
The preference is evident in the growth of equity markets and equity mutual funds in India.
| Year | Equity Markets Growth | Equity Mutual Funds AUM Growth |
| 2020 | 16.8% | 12.6% |
| 2021 | 27.2% | 40.8% |
| 2022 | 4.4% | 13.6% |
| 2023 | 23.1% | 39.7% |
| 2024 | 8.8% | 39.8% |
Source: Yahoo Finance, Association of Mutual Funds in India
However, as the data indicates, there is a significant shift towards equity mutual funds in India from regular equities. These funds have rarely disappointed investors with their performance.
Explore the basics: Equity Mutual Funds
December 2024: Equity funds contribute nearly 46% of the Industry AUM
Equity markets experienced stress in 2024 due to regulatory norms, taxation, geopolitical pressure, disturbance in supply chains, etc. The effect was evident for some time also on equity mutual funds, but with a broader view, its AUM surged significantly.
As of December 2024, the AUM of equity mutual funds in India stands at ₹30.9 trillion. This growth becomes noteworthy as total industry AUM has grown by only 31% in 2024, while equity mutual funds AUM has grown by nearly 40%.
Exploring these key drivers of this growth can help investors efficiently plan their upcoming investment journey:
Domination of thematic and flexi-cap funds!
Funds which are investing as per a particular pattern in the market, such as domestic companies, real estate, fintech, etc., are known as thematic funds. They provide more diverse exposure to the investors. In 2024, they were a key contributor to growth of equity funds. Its AUM has grown by 78.9% and has the highest number of folios in 2024 among all types of equity funds.
Along with this, flexicap funds have also provided the required push to this growth. Its AUM has grown by more than 33% in 2024.
Equity folios in the market
Growth in folios and schemes indicates growth demand for a specific investment. Equity mutual funds have successfully added 4.4 trillion new folios. Moreover, nearly 70 new equity schemes were commenced in 2024.
Increasing outflows in debt funds
Overall, the growth of industry AUM was held back by debt funds in 2024. Its AUM increased by 18.8%, but simultaneously, there was a massive increase of 48% in the redemptions. In this, overnight and liquid funds contributed the most. There is also a shift in total AUM weightage.
| Mutual Fund Category | Weightage in 2023 | Weightage in 2024 |
| Debt Funds | 41.5% | 44.5% |
| Equity Funds | 27.3% | 24.3% |
It indicates there is a shift of preference from debt to equity.
Investment in the best equity mutual funds in India
The rally of equity funds can attract investors to make investments. However, investment should be an informed decision. Investors can consider the following factors before selecting the best equity mutual funds in India suitable for them:
- Assess the financial aspiration, risk comfort and desired asset for investment.
- Consider other details like fund house, fund manager, performance, exit load, SIP facility, etc.
- Analyse the current portfolio and its required diversification.
- Check the market conditions at the time of investment. One can also consult a financial expert for a better understanding.
Also, read Mastering mutual fund evaluation: 5 Key metrics you need to know
Final Thoughts
Mutual funds have grown to become one of the crucial investment destinations for Indians. Specifically, equity funds in India are a key contributor to the growth. Recently, in 2024, the funds have delivered stunning performance when its AUM surged by 40%. Push by thematic and flexi-cap funds, increase in folios and shift from debt to equity have catalysed this growth. Investors can diversify their portfolio in such a robust investment instrument after analysing it holistically.
Dive deeper: Why is everyone talking about equity shares: Essential features & benefits!
