There has been a significant decrease in flows in small and mid-cap funds

New Delhi, March 27 (IANS) Flows in small and mid-cap funds have slowed down considerably, while other categories have witnessed an uptick in flows, according to a report by Kotak Institutional Equities. The analysis of daily flows in March reveals that while small-cap funds saw net outflows, mid-cap funds experienced positive but lower flows. Categories like large-cap, flexi cap, and hybrid funds have seen increased flows, indicating a potential shift in investor preferences.

The stock price performance for AMC stocks has been strong overall, with notable divergences among different companies. HDFC AMC and Nippon have outperformed ABSL and UTI, with a significant difference in stock price growth over the past year. The sector as a whole is now trading at a 55-60 percent premium to the broader markets, reflecting sharp variances in equity AUM growth across different AMCs.

Kotak Institutional Equities highlighted that the valuation premium for AMCs is a result of strong cash flow generation, high transparency, and predictability. However, concerns remain regarding the sustainability of fund performance and structural fee pressure due to passive investing and regulations. Despite these challenges, AMCs continue to attract investors due to well-aligned incentives across stakeholders.

Overall, the report sheds light on the evolving dynamics within the mutual fund industry, with varying flows and performance among different fund categories and AMCs. As investors navigate through these changes, it will be crucial to monitor how firms adapt to meet the evolving demands of the market.


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