Equity Mutual Fund Inflows Drop 22% in August, but SIPs Remain Steady

Inflows into equity mutual funds cooled in August, slipping 22% to ₹33,430 crore against ₹42,702 crore in July, according to data released by the Association of Mutual Funds in India (AMFI). The moderation came after July’s sharp surge, though industry experts argued that investor conviction in the asset class remains steady.

Small-cap schemes, which have been a strong magnet for retail money in recent months, saw inflows taper to ₹4,992 crore from ₹6,484 crore in July. Mid-cap funds, however, held firm, drawing ₹5,330 crore compared with ₹5,182 crore earlier, while large-cap funds posted a modest rise to ₹2,834 crore against ₹2,125 crore.

Systematic investment plans (SIPs) continued to chart a stable trajectory. Total SIP assets under management stood at ₹15.18 lakh crore in August, roughly a fifth of all mutual fund assets. Contributions amounted to ₹28,265 crore, only slightly lower than July’s ₹28,464 crore, with nearly nine crore SIP accounts active during the month.

Debt funds told a different story, however. After receiving over ₹1 lakh crore in July, the category witnessed an outflow of nearly ₹8,000 crore in August as rising yields and volatility kept investors cautious. Multi-asset allocation funds also slowed sharply, attracting ₹3,527 crore versus ₹6,197 crore in the previous month, while arbitrage funds moderated to ₹6,666 crore from ₹7,295 crore.

Anand Vardarajan, chief business officer at Tata Asset Management, pointed out that the retreat in debt was sharper than expected. “The latest AMFI numbers indicate lower flows in debt due to significant volatility, with yields rising sharply last month. Surprisingly, money market funds experienced a dramatic decline in inflows, slipping from ₹42,000 crore in July to just ₹2,000 crore in August,” he said.

On equities, he noted that flexi-cap funds continued to draw strong interest while thematic and sectoral offerings lost momentum.

For AMFI’s chief executive, Venkat N. Chalasani, the numbers underline investors’ resilience despite market cross-currents. “These steady flows across equity, hybrid, passive funds and SIPs underscore the continued confidence of investors in mutual funds as a long-term wealth creation avenue,” he said.

Despite global shocks, including the steepest-ever US tariff shock, equity flows held up well. “In August 2025, despite heightened market volatility, equity mutual funds recorded a robust net inflows, a clear reflection of investor confidence in India’s growth story,” said Pankaj Shrestha, head of investment services at PL Capital.

Mirae Asset’s Suranjana Borthakhur also dissected August’s moderation and stated that a large part of last month’s surge was driven by sectoral categories, with nearly ₹7,000 crore coming from NFOs alone. “Hybrids too have eased, with inflows slowing from ₹20,000 crore to around ₹15,000 crore, largely due to arbitrage funds cooling off,” she explained.

At the same time, Borthakhur noted that investor appetite for riskier corners of the market remained surprisingly resilient. “Despite valuations in mid- and small-cap funds having looked stretched a few months ago, inflows continue to remain robust with over ₹10,000 crore coming into these categories for two consecutive months,” she added.

She also underlined a shift towards diversification. “Flexi-cap and multi-cap funds have emerged as the preferred categories for long-term allocations, with flexi-caps alone attracting steady inflows of about ₹7,600 crore in back-to-back months. On the alternatives side, gold ETFs have seen a sharp jump in traction from around ₹1,200 crore last month to nearly ₹7,200 crore this month. Overall, flows suggest that investors are taking a more balanced approach, with diversification across equities, hybrids, and gold gaining ground depending on time horizons and risk appetite.”