The mutual fund industry saw a substantial rebound in 2023 with its asset base surging by nearly Rs 11 trillion, reaching over Rs 50 trillion mark fuelled by an optimistic equity market, steady interest rates, and a robust economic expansion, data from the Association of Mutual Fund Industry (Amfi) showed on Monday.

The development comes after a lackluster performance in 2022 with 2023 witnessing a substantial increase in overall inflow.

In terms of net inflows, the industry registered Rs 2.7 trillion in 2023 as compared to an inflow of over Rs 71,000 crore in the preceding year.

The huge inflow could be on the back of sustained investor interest in equity funds, arbitrage funds, and index funds & ETFs.

The inflow has pushed the assets under management (AUM) of the mutual fund industry by 27%, adding Rs 10.9 trillion in 2023.

Inflows into India’s equity mutual funds rose in December, driven by a sustained preference for small-caps. Net equity mutual fund inflows rose to Rs 16,997 crore last month from Rs 15,536 crore in November, the data showed.

Amfi data said this was way higher than the 5.7% growth and Rs 2.65 trillion increase in AUM observed throughout 2022, as well as the nearly 22% growth and close to Rs 7 trillion addition to the asset base in 2021.

The asset base rose from Rs 39.88 trillion in 2022 to an all-time high of Rs 50.78 trillion in 2023, the data showed. The asset base stood at Rs 37.72 trillion at the end of December 2021 and Rs 31 trillion in December 2020.

Small-cap funds accounted for most of the investments for the 15th straight month at Rs 3,857 crore, more than one-fifth of the overall equity mutual fund inflows, the data said.

In contrast, mid-cap funds saw inflows nearly halving month-on-month to Rs 1,393 core, while large-caps witnessed outflows of Rs 281 crore, in December.

The sustained domestic inflows along with record monthly buying by foreign portfolio investors drove India’s benchmarks Nifty 50 and Sensex to all-time highs, rising about 8% each in December.

Notably, 2023 marked the 11th consecutive yearly rise in the industry AUM after a drop in two preceding years. The growth was supported by inflows in equity schemes, especially through Systematic Investment Plans (SIPs).