Notwithstanding the record-breaking rally of key benchmark indices and skyrocketing flows through systematic investment plans, the net inflows into equity schemes were flat at ₹1.62 lakh crore last year against ₹1.61 lakh crore logged in 2022.

New fund offers at ₹63,854 crore last year, accounted for 39 per cent of overall equity inflows.

Investors preferred to book profit consistently at every available opportunity last year on the back of growing uncertainty globally and buoyed by logic-defying bull runs in the domestic markets.

The reality is slowly sinking in, with most corporates registering a flattish topline growth in the December quarter due to weak demand across sectors and the bottomline boosted by lower input costs.

Investments into small, mid and thematic funds accounted for 59 per cent of the overall inflow into equity funds last year on the back of euphoria around small-cap investment and new thematic fund launches.

Small-cap funds, which garnered the highest investments, have doubled inflows to ₹41,035 crore against ₹19,795 crore in 2022, while new fund offer-driven thematic schemes emerged the second highest by attracting fresh inflows of ₹30,841 crore against ₹20,864 crore logged in the previous year.

Midand multi-cap funds attracted investment of ₹22,913 crore (₹20,550 crore) and ₹20,145 crore (₹ 18,124 crore).

Focused and large-cap funds registered a net outflow of ₹2,718 crore (inflow of ₹11,766 crore) and ₹2,968 crore (inflow of ₹13,673 crore) last year.

Nilesh Naik, Head of Investment Products, Share.Market said small and mid-cap funds had attracted a significant portion of investor inflows due to their strong performance in the last three years compared to large- cap or more diversified funds. In CY 2023, about 40 per cent of the total net equity inflows were in these two categories.

The performance gap will narrow down in small and mid-cap categories in the second-half of this year as the base effect starts kickingin and any significant fall in market in the near future may also have a negative impact on inflows, he added.

Sujit Bangar, Founder, said tax-saver mutual fund schemes are losing sheen as taxpayers are flooded with options of switching over to new tax regimes for availing lower taxes without the requirement of investing in tax-saving MF schemes.

Small and mid-cap funds inflows may not continue if markets remain volatile in the near future, he added.