While flexicap funds continue to attract steady inflows, largecap, midcap, and smallcap categories saw significant moderation, reflecting growing investor caution amid sideways markets and profit booking.
“The flexicap category remains resilient, but smallcap and midcap segments have seen outflows. Investors are pausing after capturing recent gains, waiting for clarity before reinvesting,” Borthakur said.
Hybrid and gold funds emerge as safe havens
Interestingly, hybrid and gold funds have gained traction as investors seek safety. Multi-asset and arbitrage schemes saw strong inflows as investors used them as a temporary parking space for redeployment during market corrections.
“Hybrids, particularly arbitrage funds, are building up again,” said Borthakur. “Gold has seen consistent inflows of ₹7,000–8,000 crore over the past three months as investors diversify their portfolios.”
Passive investing and SIPs show strong commitment
Even as active equity inflows slowed, passive index funds and ETFs rose 22%, highlighting a growing preference for low-cost diversification.Meanwhile, SIP inflows continue to demonstrate strong retail discipline, crossing ₹29,500 crore for yet another month.“The most encouraging sign is that retail investors are staying committed to SIPs,” Borthakur said. “Investors are learning that wealth creation comes from consistency, not timing the market.”
Domestic flows offset weak FII activity
Despite muted foreign inflows, domestic retail and institutional investors (DIIs) are providing crucial market support. Borthakur noted that as global rate cuts begin, India may see stronger FII participation in the coming quarters.
“FIIs have been cautious because of valuations, but once Fed rate cuts materialize, flows into emerging markets, including India, could increase,” she added.
NFO activity picks up amid changing investor behavior
The market saw 18 new fund offerings (NFOs) this month, collectively raising about ₹6,000 crore, reflecting continued interest in new investment themes.
However, Borthakur cautioned against chasing trends:
“Investors should align NFO participation with their risk appetite and long-term goals, not short-term hype.”
Key takeaways
- Equity mutual fund inflows fell 19% MoM, with weakness in large-, mid-, and smallcap segments.
- Flexicap, hybrid, and passive funds remain resilient.
- Gold funds saw ₹7,000–8,000 crore inflows over three months.
- SIP flows above ₹29,500 crore show strong retail discipline.
- DIIs and NFOs continue to support markets amid weak FII inflows.