Month: May 2025

In a stormy 2025 for Indian mutual funds, about 70% of mutual fund schemes across equity, debt, hybrid, and precious metals categories have delivered positive year-to-date (YTD) returns, showcasing resilience amid global tensions and market volatility.

Market Snapshot: Tepid Equities, High Volatility

The Indian equity market has experienced muted returns so far in 2025. The Nifty 50 index gained only 4.68% YTD till May 28, while the Nifty Midcap 150 and Nifty Smallcap 250 indices fell 0.46% and 5.89% respectively. Earlier in the year, the indices saw significant drawdowns, with the midcap and smallcap indices dropping up to 26%, reflecting heightened volatility due to:

• Ongoing US-China trade tensions

• Weak domestic earnings

• The India-Pakistan conflict

Nirav Karkera, Head of Research at wealthtech firm Fisdom, notes that “Indian equities were undergoing a healthy correction phase even before these events, making valuations attractive and creating pockets of opportunity that many thematic mutual funds have capitalized on.”

Key Performance Highlights: Defence, Gold, BFSI Lead Gains

Data from ACE MF, a mutual fund research platform, highlights that out of nearly 1,800 mutual fund schemes, about 1,650 funds with at least five months of track record show that 1,162 schemes are posting positive returns YTD.

• Top performer: The DSP World Gold Fund of Fund (FoF), investing in gold and gold mining companies, led gains boosted by a 25% rise in international gold prices.

• Gold funds overall have delivered an impressive average YTD return of 24%, driven by geopolitical uncertainty, tariff wars, and stock market volatility.

• The defence mutual fund category topped the charts with average returns exceeding 30% YTD, fueled by the India-Pakistan conflict and government approval of Rs 54,000 crore in defence orders.

• The Banking, Financial Services, and Insurance (BFSI) funds also performed well, returning an average of 8% YTD, as valuations in major banks became attractive, offering value investment opportunities.

Kirtan Shah, founder of Credence Wealth, adds, “Value investing has been the preferred strategy in BFSI funds, especially with many banks trading near pre-COVID valuation levels.”

Underperformers: IT, Digital, Smallcap Funds Lag

Not all sectors have fared well in 2025:

• Information Technology (IT) mutual funds are the worst performers, down over 11% YTD due to tariff-related uncertainties and the impact of the US Department of Government Efficiency’s (DOGE) spending cuts.

• Digital India thematic funds, along with smallcap and momentum funds, have also seen weak performance amid cautious investor sentiment and market turbulence.

Investment Strategy Outlook for 2025

According to experts, value investing remains key in the near term as markets transition from a correction phase:

• Kirtan Shah highlights ongoing uncertainty over global policies and interest rate dynamics.

• Motilal Oswal Private Wealth suggests that while largecap valuations have moved from attractive to fair, emerging selective opportunities exist in midcap and smallcap stocks.

Their recommended approach includes:

• Lump sum investments in hybrid, largecap, and flexicap funds.

• A staggered investment strategy over 2-3 months for midcap and smallcap funds, taking advantage of market pullbacks for more aggressive exposure.

The Indian mutual fund industry has scaled a historic high, with assets under management (AUM) crossing ₹70 trillion in March 2025 — marking a 22.25% year-on-year (YoY) growth, according to a report by ICRA Analytics. This robust expansion underscores rising retail participation and growing investor confidence, despite global uncertainties.

Equity, Hybrid, and Passive Funds Lead the Surge

Open-ended “other schemes” — which include index funds, ETFs, and FoFs investing overseas — posted the highest YoY growth at 23.80% in April 2025, followed by equity mutual funds (23.57%) and hybrid schemes (20.74%), as per data from the Association of Mutual Funds in India (AMFI).

Within the passive investment segment:

• Gold ETFs witnessed an explosive 87.33% YoY growth, reaching ₹61,422 crore.

• Index funds recorded a 31% YoY growth, taking the total AUM to ₹2,92,206 crore.

Sectoral and Debt Schemes Also Shine

In the equity category:

• Sectoral/thematic funds saw the highest AUM growth at 49.94%, followed by

• Multi-cap funds, which grew 35.79% YoY.

In the debt segment:

• Long duration funds surged by 58.14% YoY.

• Money market and ultra-short duration funds grew by 44.79% and 32.78% respectively.

Retail Participation on the Rise

The total number of mutual fund folios rose by 30.21% YoY as of April 2025. This growth was primarily led by:

• A 45.94% increase in folios for “other schemes”,

• A 31.39% rise in equity scheme folios.

However, debt scheme folios declined by 1.15%, suggesting a shift in investor preference toward equities and passive products.

Equity Inflows Continue Amid Global Tensions

Despite headwinds from geopolitical tensions and reciprocal tariffs imposed by the U.S., investor confidence remained resilient:

• Equity mutual funds recorded net inflows of ₹24,269.26 crore in April 2025.

• This marked the 50th consecutive month of positive inflows in the equity segment since March 2021.

• Although inflows dipped 3.24% month-on-month (MoM), they rose 28.29% YoY, reflecting long-term investor discipline.

ETFs and SIPs See Steady Growth

Domestic ETFs (excluding Gold ETFs) attracted record net inflows of ₹19,057 crore, reflecting a shift toward low-cost passive investing.

SIP (Systematic Investment Plan) metrics also showed strong growth:

• Total SIP accounts rose 5% YoY to 914.41 lakh.

• SIP contributions grew 31% YoY to ₹26,632 crore in April 2025.

• SIP AUM rose 23% YoY, and now comprises 19.85% of total mutual fund AUM.

In a historic economic milestone, India has officially surpassed Japan to become the fourth-largest economy in the world, confirmed NITI Aayog CEO BVR Subrahmanyam. Citing data from the International Monetary Fund (IMF), Subrahmanyam stated that India’s GDP has now reached USD 4 trillion, placing it behind only the United States, China, and Germany.

India’s Economic Rise: From Fragile to Fourth

“We are the fourth largest economy as I speak,” said Subrahmanyam, adding that India was ranked fifth until 2024. He emphasized that favorable geopolitical conditions and robust economic planning have supported this rapid ascent. The IMF projects India’s nominal GDP to hit USD 4.19 trillion in 2025, slightly ahead of Japan, thus marking this transition.

India’s journey is particularly remarkable given its past classification as part of the “fragile five” economies. Over the past decade, India has emerged as a global growth engine, now firmly positioned among the top global economies.

Steady Growth Path and Vision for 2047

According to the IMF’s World Economic Outlook (April 2025), India’s economy is projected to grow at 6.2% in FY 2025-26, driven by strong private consumption, especially in rural areas. This is significantly higher than the projected global growth rate of 2.8% for the same period.

India’s per capita income has doubled from USD 1,438 in 2013–14 to USD 2,880 in 2025, signaling improved living standards and economic inclusion.

Looking ahead, the NITI Aayog’s “Viksit Bharat @2047” vision outlines India’s ambition to become a USD 30 trillion economy and a high-income nation by its 100th year of independence. The framework focuses on six strategic pillars:

1. Macro-Economic Goals and Strategy

2. Empowered Citizens

3. A Thriving and Sustainable Economy

4. Technology and Innovation Leadership

5. Global Leadership – Vishwa Bandhu

6. Governance, Security, and Justice Delivery

India Poised to Become 3rd Largest Economy by 2028

With its current growth momentum and strategic policy reforms, India is on track to overtake Germany and emerge as the third-largest economy in the world within the next 2.5 to 3 years, according to Subrahmanyam.