Mutual funds feel the pinch: Equity inflows tank 37% since January peak

Equity-oriented mutual fund schemes recorded their third consecutive monthly decline in net inflows, according to the latest data from the Association of Mutual Funds in India (AMFI). Inflows dropped to ₹25,082 crore in March 2025, marking a 14% fall from ₹29,303 crore in February and a sharp 36.8% decline compared to ₹39,688 crore in January. The sustained dip in investor contributions signals growing caution amid market volatility and premium valuations.

Nehal Meshram, Senior Analyst - Manager Research, Morningstar Investment Research India, said, "In March 2025, net inflows into Indian equity mutual funds declined to an 11-month low of approximately ₹25,082 crore, marking the third consecutive monthly drop. This slowdown was largely driven by a sharp reduction in investments in sectoral and thematic funds, which had previously seen strong traction. Notably, only four New Fund Offers (NFOs - Samco Large Cap Fund, Helios Mid Cap Fund, Mahindra Manulife Value Fund and Motilal Oswal Active Momentum Fund) were launched and concluded during the month, significantly fewer than in preceding months, further contributing to the dip in overall inflows."

Equity-oriented open-ended funds witnessed cumulative inflows of ₹4,17,053 crore in FY 2025, significantly higher than the ₹1,84,091 crore recorded in FY 2024. This substantial increase can be attributed to improved investor sentiment driven by robust corporate earnings, favorable macroeconomic conditions, and a continued shift towards equity as a preferred asset class.

Jatinder Pal Singh, CEO of ITI Mutual Fund, noted, "Interestingly, equity AUM grew by 7.5% to ₹29.5 lakh crore, and the overall industry AUM rose to ₹65.74 lakh crore in March 2025. Continued incremental inflows were mainly seen in Flexi Cap, Small Cap and Multi Cap categories, which is a positive sign, indicating a long-term investment approach by investors despite global and macroeconomic concerns."

Adding further perspective, Suranjana Borthakhur, Head of Distribution & Strategic Alliances, Mirae Asset Investment Managers (India) said, "What's encouraging is the continued inflow into small-cap funds, assuming investors are keeping a long-term time horizon in mind and not getting swayed by recent experience alone. Sectoral categories have seen slower flows, which is good considering there were disproportionate flows into the category in previous months."

Also, sustained SIP contributions above ₹25,000 crore reflect a maturing investor mindset focused on long-term goals. "However, the sharp drop in hybrid fund flows is concerning - especially since hybrid products are well-suited to help investors navigate market fluctuations with a balanced risk approach. In times like these, maintaining discipline, staying invested, and relying on diversified solutions like hybrid products can truly help investors ride through volatility while staying aligned with their financial objectives," said Borthakhur.

Despite the recent cooling in monthly equity fund inflows, the broader picture remains one of resilience and evolving investor maturity. While near-term caution amid elevated valuations and global uncertainties is understandable, the sustained SIP momentum and steady allocations to diversified categories like flexi-cap and multi-cap funds suggest investors are learning to navigate volatility with patience and discipline. As the mutual fund industry adapts to shifting market dynamics, staying focused on long-term goals, asset allocation, and risk-adjusted strategies will remain key to building enduring financial strength.