Amidst heightened market volatility and global uncertainties, net inflows into Indian equity mutual fund schemes significantly moderated in FY26, as investors increasingly pivoted towards safer investment avenues like hybrid funds and gold ETFs.
Key Points
- Net inflows into equity mutual fund schemes in FY26 moderated to approximately ₹3 trillion till February, a 27 per cent decrease compared to FY25.
- Choppy equity markets, with Nifty 50 falling 5.1 per cent and Sensex declining 7.1 per cent in FY26, contributed to reduced lump-sum investments.
- Investor preference shifted towards capital protection, leading to strong inflows into hybrid funds and gold ETFs, which collectively garnered about ₹2.38 trillion.
- Flexicap schemes emerged as the top equity category, attracting nearly ₹80,000 crore, while midcap and smallcap funds also saw moderated inflows.
- Multi-asset funds and Silver ETFs gained popularity, with multi-asset funds attracting ₹60,000 crore and Silver ETFs seeing inflows of ₹31,000 crore.
Net inflows into equity mutual fund (MF) schemes moderated in financial year 2025-26 (FY26), after scaling new highs in the past two years.
Inflows stood at about Rs 3 trillion till February, nearly 27 per cent lower than the FY25 tally, as choppy markets dented lump-sum investments and slowed new fund launches.
FY26 was a weak year for the equity market in terms of performance, as the Nifty 50 fell 5.1 per cent and Sensex declined 7.1 per cent.
Shift Towards Safer Investments
The moderation in equity flows, however, was offset by strong inflows into hybrid funds and gold ETFs, which have risen by around Rs 1 trillion this year.
The two fund categories, which had together raked in Rs 1.3 trillion in FY25, have garnered Rs 2.38 trillion as of February in FY26.
The data for March is due in the second week of April.
"Amid heightened volatility, global uncertainties and recent market corrections, investor preference has clearly shifted towards capital protection.
"This is reflected in stronger flows into asset allocation funds and gold- and silver-linked products, even as pure equity inflows have moderated.
"Within equities too, flows have moved towards relatively safer categories like flexicap and largecap funds," said Akhil Chaturvedi, executive director and chief business officer at Motilal Oswal Asset Management.
Popular Categories and Market Dynamics
Flexicap schemes emerged as the top category as investors poured nearly Rs 80,000 crore into these schemes.
Midcap and smallcap funds, which were the most popular categories in most periods of the previous two years, were the other two most popular equity schemes, even as net inflows moderated to some extent.
Himanshu Srivastava, associate director and manager, research, at Morningstar Investment Research India, also attributed the shift in investor preferences to the equity market volatility.
"Relatively muted returns and elevated uncertainty may have prompted investors to moderate fresh allocations towards equities, while some may also have chosen to book profits periodically," he said.
"In contrast, hybrid and commodity-oriented strategies appear to have benefited from this environment in FY2026.
"Hybrid funds have attracted investor interest because of their ability to balance risk and return through allocation across asset classes," he added.
Growth in Multi-Asset and Silver ETFs
Multi-asset funds, which were a niche MF offering until 2022, continued to gain popularity in FY26.
The scheme category, which has the flexibility to invest across equity, debt and commodities, garnered Rs 60,000 crore net inflows in the first 11 months of the year, on the back of strong performance.
Silver ETFs also benefitted from the precious metal rally.
The net inflows into schemes as of February in FY26 stood at Rs 31,000 crore, more than double the category's assets under management (AUM) at the start of the year.
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