How Much Did MF Exposure in NBFCs Increase in May?
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Synopsis
The mutual fund sector is experiencing a monumental shift as exposure to NBFCs skyrockets by 32.5 percent, reaching an astonishing Rs 2.77 lakh crore in May. This report highlights the driving forces behind this surge and its implications for the financial landscape.
Key Takeaways
- Mutual fund exposure in NBFCs increased by 32.5%.
- Reached a total of Rs 2.77 lakh crore in May.
- Commercial papers and corporate debt drove growth.
- Total AUM rose to Rs 72.2 lakh crore.
- Equity funds grew 4.83% month-on-month.
New Delhi, July 2 (NationPress) The mutual fund exposure in non-banking financial companies (NBFCs) surged by 32.5 percent to hit Rs 2.77 lakh crore in May, as reported by CareEdge Ratings.
This impressive year-on-year growth was primarily fueled by commercial papers (CPs) and corporate debt, which have consistently remained above Rs 2 lakh crore for a continuous period of 14 months.
Previous figures showed Rs 2.69 lakh crore in April and Rs 2.64 lakh crore in July 2018.
However, the proportion of NBFC credit in total bank credit decreased from 9.3 percent in May 2024 to 8.5 percent in May this year, according to the data.
The overall assets under management (AUM) of the mutual fund industry increased to Rs 72.2 lakh crore in May, up from Rs 70 lakh crore in April. The industry saw net inflows totaling Rs 29,108 crore that month, with 65 percent of those inflows coming from the equity category, as per the latest AMFI data.
AUM for equity funds experienced a 4.83 percent month-on-month increase, reaching Rs 32.05 lakh crore, driven by positive inflows and mark-to-market (MTM) gains. Flexi cap funds attracted Rs 3,841 crore in inflows, marking the highest in the equity category for three consecutive months.
Assets in hybrid funds grew 4.43 percent to Rs 9.55 lakh crore, supported by the highest monthly net inflows of Rs 20,765 crore and MTM gains. Within this category, arbitrage funds saw the most significant inflows, totaling Rs 15,702 crore.
The passive funds segment also recorded net inflows of Rs 5,525 crore during the month, marking the 55th consecutive month of positive inflows.
Gold exchange-traded funds (ETFs) reported net inflows in this month, contrasting with outflows from the previous two months, driven by geopolitical tensions, market volatility, and expectations of rate cuts.
Point of View
I believe this significant growth in mutual fund exposure to NBFCs reflects a broader trend in the financial market. While the numbers are promising, it is crucial to remain vigilant about the decreasing share of NBFC credit in total bank credit. Our focus should be on sustainable growth and understanding the underlying factors that drive these changes.
NationPress
03/07/2025
Frequently Asked Questions
What is the current mutual fund exposure in NBFCs?
As of May, the mutual fund exposure in non-banking financial companies has grown to Rs 2.77 lakh crore, reflecting a 32.5 percent increase.
What factors contributed to the growth in mutual fund exposure?
The growth was primarily driven by commercial papers and corporate debt, which have consistently remained above Rs 2 lakh crore for 14 months.
What was the total assets under management for mutual funds in May?
The total assets under management for the mutual fund industry rose to Rs 72.2 lakh crore in May.
How did equity funds perform in May?
Equity funds saw a 4.83 percent month-on-month increase in AUM, reaching Rs 32.05 lakh crore.
What are the trends in passive funds?
The passive funds category recorded net inflows of Rs 5,525 crore, marking the 55th consecutive month of positive inflows.
