India's mutual fund assets reach Rs 58.3 trillion after record-breaking surge in May

India's mutual fund assets rose to 58.6 trillion rupees ($701.90 billion) in May, inching closer to adding 10 trillion rupees in less than a year, the fastest rise on record, data showed on Monday.

While the fund industry took five decades to build the first 10 trillion rupees of assets since its inception in 1964, it has added the last 9 trillion rupees of assets in less than six months.

Inflows into equity mutual funds rose 83% month-on-month to 346.97 billion rupees last month, with investors continuing to prefer small- and mid-caps, according to data from the Association of Mutual Funds in India (AMFI).

Net equity mutual fund inflows in May are the highest on record since April 2019, when AMFI started reporting monthly mutual fund flows in the current format.

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Domestic equity mutual funds have seen net inflows every month since February 2021, aggregating 5.58 trillion rupees, well above net foreign inflows over the same period.

The benchmark NSE Nifty 50 has risen about 55% over these last 39 months, aided by mutual fund inflows.

Despite concerns over high valuations, inflows into small-caps rose 23.4% to 27.25 billion rupees in May, while mid-cap fund inflows increased 45.3% to 26.06 billion rupees.

Meanwhile, large-caps saw inflows almost double to 6.63 billion rupees.

"Over the last year, small- and mid-cap categories attracted significant inflows due to their growth potential," said Feroze Azeez, deputy chief executive at Anand Rathi Wealth."

Stress tests have indicated that there is no liquidity stress in the two categories, comforting investors and spurring continuous allocations,” added Azeez.

The benchmark Nifty 50 and small-cap shed 0.33% and 1.85% in May, respectively, while mid-caps rose 1.65%.

Meanwhile, contributions to systematic investment plans (SIPs) touched a record high of 209.04 billion rupees in May.

Sectoral and thematic fund inflows hit a record 192.13 billion rupees in May, aided by interest in New Fund Offers (NFOs).