Mutual Fund Industry Sees 11% Growth in Assets Under Management in FY26, Marking Slowest Annual Expansion in Three Years

Mutual Fund Industry Records Slowest Growth in Three Years Amid Volatility

The Indian mutual fund industry added a staggering Rs 8 lakh crore to its asset base in the fiscal year 2026 (FY26), marking the slowest rise in three years. This growth, however, came amidst continued volatility in Indian equity markets, which was exacerbated by factors such as elevated valuations, subdued earnings, geopolitical tensions, and the absence of AI-linked investment opportunities.

According to data from the Association of Mutual Funds in India (AMFI), the assets under management (AUM) of the mutual fund industry rose by 12.2 percent, or Rs 8 lakh crore, to Rs 73.73 lakh crore in FY26. This growth rate is sharply lower than the nearly 23 percent and 36 percent growth recorded in FY25 and FY24, respectively.

The sustained volatility in Indian equities throughout the year was driven by a combination of factors, including elevated valuations, subdued earnings, geopolitical tensions, continued Foreign Institutional Investor (FII) selling, and the absence of AI-linked investment opportunities. More recently, the US-Iran-Israel conflict pushed crude oil prices higher and raised concerns over India's fiscal position. As a result, the Sensex and Nifty declined by 7 percent and 5 percent, respectively, while the BSE MidCap 150 and SmallCap 250 indices fell by 1 percent and 6.5 percent.

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Despite the volatility, retail investor participation remained strong, with Systematic Investment Plan (SIP) contributions during FY26 standing at Rs 3.5 lakh crore, a 20.7 percent increase from Rs 2.9 lakh crore in the previous year. The number of contributing SIP accounts increased to 9.72 crore from 8.12 crore a year ago.

A recent report by Jefferies India highlighted the recent correction in Indian equities, which has improved valuations significantly. The market's earlier premium has corrected sharply, with India moving from being expensive to fair and nearing attractive levels. The report also noted that most foreign institutional selling had already taken place earlier this year, indicating limited additional pressure from this segment. However, it flagged two key risks: any escalation involving Iran that could push up crude oil prices, and a slowdown in mutual fund inflows that could weaken a key source of market support and increase volatility.

In terms of categories, large-cap funds saw AUM remain largely flat at Rs 3.66 lakh crore during the fiscal. In contrast, midcap and smallcap funds recorded growth of nearly 13 percent each, with AUM rising to Rs 4.18 lakh crore and Rs 3.35 lakh crore, respectively. Multi-cap funds saw a 14 percent increase in AUM, while value-contra, focused, and sectoral thematic funds recorded marginal growth. ELSS schemes, however, saw a 6.4 percent decline in AUM during the fiscal. Most categories reported their slowest growth or sharpest decline since FY20.

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