Fortune India Explainer: Why equity MF flows cooled off in Aug and should investors be worried?

Equity mutual funds continued to attract strong investor interest in August 2025, however the pace of inflows slowed compared to the July month. Net inflows for the August stood at ₹33,430 crore, as per data from the Association of Mutual Funds in India (AMFI). While this reflects healthy participation, it was a noticeable drop of around ₹9000 crore from July’s record ₹42,702 crore.

The moderation has raised questions—was this just a cooling-off after a blockbuster month, or a sign of caution creeping into investor sentiment?

Here is a quick FAQ to help understand what happened.

Q. What was the amount invested in equity mutual funds in August?

Equity mutual funds saw net inflows of ₹33,430 crore. The SIP contribution for August 2025 stood at ₹28,264 crores, marginally lower than the corresponding figure of ₹28,464 crores for July. Besides, there were a total of 23 new fund offers (NFOs) in August, raising ₹2,859 crore. These included two thematic funds, 11 index funds, and six exchange-traded funds (ETFs), according to data from AMFI. This was lower than the ₹42,702 crore recorded in July, which was the highest ever.

Q. Why did the inflows decrease compared to July?

Experts say the main reason was fewer New Fund Offers (NFOs) in August. In July, NFOs raised nearly ₹9,000 crore, which increased the overall numbers. In August it was only around ₹2,859 crore. Without such a push in August, inflows appeared lower even though the regular flow of money stayed steady.

Q. Should investors worry about this dip?

Investors should not really worry about it. The inflows are still very strong. According to fund managers, systematic investment plans (SIPs) contributed around ₹28,264 crore in August, which is consistent with July ₹28, 464 crore. This indicates that investors are maintaining their long-term equity commitments. According to the WhiteOak Capital Mutual Fund study, "Equity as an asset class is relatively very volatile, and there can be periods of low returns in the early stages of a long-term SIP. However, historical data suggests that a SIP which has delivered relatively lower returns in its first 5 years, has in fact delivered a higher return over the next 10 years, on average."

Q. Which funds categories saw the greatest gains in August?

Flexi-cap funds led the list with a record ₹7,679 crore inflow, slightly higher than July’s record. Mid-cap funds attracted ₹5,331 crore, and small-cap funds received ₹4,993 crore. Sectoral and thematic funds experienced a significant decline, with inflows falling to ₹3,893 crore from July’s ₹9,246 crore. Large-cap funds saw a little push with ₹2,835 crore inflows.

However, the study reveals that, among the three market capitalisation segments (large, mid, and small cap), the mid-cap segment was a good investment option for investors seeking to invest via the long-term SIP route.

Q. What role did retail investors play?

According to experts, retail investors continued to stay steady through SIPs. They were not shaken by global volatility and were encouraged by the economic outlook of India, reforms such as GST rationalisation, and hopes for better corporate earnings. Additionally, the study also revealed that while equities have historically proven to be a volatile asset class, volatility decreases as investors increase their investment horizon.

Q. What about other asset classes in August?

Debt funds experienced weaker inflows owing to rising bond yields and increased volatility. Gold funds saw substantial inflows of around ₹2,190 crore, one of the highest in recent months, as investors looked for diversification through precious metals. Hybrid funds and arbitrage funds also saw steady inflows.

Q. So, does the lower August inflow indicate a negative sign?

Eventually, not! Experts say that if there had been as many NFO launches in August as in that were in July month, the August figure could have been closer to, or even higher than, July’s record. The steady SIP contributions and broad-based flows into equity categories show investor confidence remains intact.