Financials, IT Attract Maximum MF Inflows in July; Eternal, InterGlobe Aviation See Sharpest Cuts

Navigating a choppy July marked by mixed Q1 earnings, global trade uncertainties and foreign outflows, domestic mutual funds found safe harbour in financials and IT, parking capital towards blue chips with decent valuations and future growth stories.

Data compiled by Nuvama Alternative & Quantitative Research, covering equity, ETFs, ELSS and equity-oriented hybrid schemes across 11 large mutual fund houses, showed financials and IT stocks attracting the highest inflows during the month.

State Bank of India emerged as the clear favourite, drawing ₹10,200 crore in mutual fund inflows in July. The bank featured among the top five additions for at least five fund houses during the month.

Analysts pointed to its fair valuations, steady earnings profile and robust growth outlook as the main drivers. Tata Mutual Fund, for instance, highlighted the potential for an upgrade cycle in the banking sector in FY26, citing expected growth of 12–13%, supported by easing liquidity conditions and a recovery in non-bank finance companies and unsecured retail lending.

IT services majors Tata Consultancy Services and Infosys were next in line, together receiving ₹9,400 crore in mutual fund investments. Both stocks have corrected in recent months amid concerns over the macroeconomic environment and the pace of deal wins, creating entry opportunities for fund managers. Long-term growth prospects for the sector, however, remain intact, making these companies attractive additions. Other major gainers in July’s mutual fund portfolios included HDB Financial, Axis Bank, Kotak Mahindra Bank and HCLTech.

At the other end of the spectrum, Zomato parent Eternal and InterGlobe Aviation, operator of IndiGo, saw the sharpest mutual fund outflows. Fund managers sold about ₹2,400 crore worth of InterGlobe Aviation shares and ₹1,700 crore of Eternal, according to Nuvama’s data.

Zomato’s soaring valuation, the highest among Nifty 50 stocks, has often drawn attention over questions of sustainability. Mutual funds appear to have taken note, trimming their holdings to lock in gains.

Overall, mutual funds invested ₹45,400 crore into Indian equities in July, helping offset the selling by foreign institutional investors, who pulled ₹38,200 crore from the secondary market. The flows underscored the supportive role played by domestic institutions in maintaining market stability.

Even so, a degree of caution was visible among DIIs too. The cash and equivalents held by the mutual fund industry rose to ₹1,82,300 crore in July, making up 5.46% of total assets under management, compared with ₹1,85,000 crore, or 5.34%, in June. This increase suggests fund managers were keeping some powder dry in light of market conditions.

“The Indian equity markets experienced a downturn in July, ending a four-month winning streak, as global uncertainty, a strengthening US dollar, and significant foreign fund outflows exerted pressure,” said Venkat N. Chalasani, chief executive of the Association of Mutual Funds in India (AMFI).

He noted, however, that the industry’s ability to attract sustained inflows reflected investors’ continued faith in mutual funds as a long-term wealth creation tool. “This was evident in the sustained positive flows, which resulted in a 1.3% increase in assets to ₹75.36 lakh crore in July,” Chalasani said.

With financials and IT accounting for the bulk of inflows, and select consumer and industrial names seeing reduced exposure, July’s portfolio shifts suggest mutual fund managers are balancing short-term caution with targeted bets on sectors where valuations and long-term growth prospects align.