Equity mutual fund inflows declined sharply in October, falling nearly 19 per cent to Rs 24,691 crore from Rs 30,422 crore in September, reflecting a cautious investor approach amid range-bound markets and profit booking in overheated segments. However, overall mutual fund flows strengthened as debt-oriented schemes saw a significant return of capital after two months of outflows, signalling a tactical re-balancing of portfolios.
Data from the Association of Mutual Funds in India (AMFI) shows that the equity inflow slowdown was broad-based across categories, although most of the 11 equity sub-categories continued to witness net positive investments. Flexicap funds remained the standout performer, drawing Rs 8,929 crore in October, up 27 per cent from Rs 7,029 crore in September, reinforcing investor preference for diversified strategies with flexibility across market capitalisations.
Flexicap Funds Lead As Mid And Small-cap Inflows Moderate
In contrast, mid-cap and small-cap funds — which have delivered outsized returns over the past year — saw inflows moderate significantly. Mid-cap funds registered inflows of Rs 3,807 crore, down 25 per cent month-on-month, while small-cap funds attracted Rs 3,476 crore, marking a 20 per cent decline. Large-cap funds too saw a steep drop in traction, recording inflows of Rs 972 crore compared with Rs 2,319 crore in September, representing a 58 per cent month-on-month fall. The trend points to consolidation as valuations in broader markets remain elevated and investors exercise caution ahead of corporate earnings and macroeconomic signals.
Dividend yield funds recorded outflows of Rs 178 crore for the third straight month, while equity-linked savings schemes (ELSS) continued to lose momentum, witnessing Rs 665 crore in outflows.
Debt Funds Rebound Sharply with Rs 1.59 Lakh Crore Inflows
On the fixed-income side, debt-oriented mutual funds saw a strong resurgence, reporting inflows of Rs 1.59 lakh crore in October after witnessing withdrawals of Rs 7,979 crore in August and a sharper Rs 1.01 lakh crore outflow in September. The return of inflows suggests that institutional investors, treasuries, and corporates moved funds into debt as part of quarter-end liquidity management strategies and in anticipation of near-term policy clarity from the Reserve Bank of India.
Among debt categories, liquid funds led with inflows worth Rs 89,375 crore, followed by overnight funds which gathered Rs 24,050 crore. Shorter-tenure funds benefitted the most, reflecting a defensive stance in a market awaiting cues on both interest rate direction and global market stability. Meanwhile, long duration funds reported the highest outflow of Rs 942 crore, as investors remained wary of duration risk in an environment of uncertain rate path projections.
Hybrid And Passive Flows Reflect Tactical Allocation
Hybrid schemes also gained investor favour in October, with inflows rising 51 per cent month-on-month to Rs 14,156 crore from Rs 9,397 crore in September. Arbitrage funds contributed the largest share at Rs 6,919 crore, followed by multi-asset allocation funds which added Rs 5,344 crore. The movement suggests that investors are tactically shifting capital into hybrid strategies to manage volatility and retain liquidity while staying partially invested in equities. Equity savings funds and conservative hybrid funds saw marginal inflows, indicating selective asset allocation based on risk tolerance.
Passive funds saw comparatively subdued momentum. Other schemes, including ETFs, index funds and fund-of-funds recorded a 13 per cent decline in inflows to Rs 16,668 crore from Rs 19,056 crore in September. Within this segment, gold ETFs continued to stand out, attracting Rs 7,743 crore amid heightened global geopolitical uncertainty and rising gold prices. Other ETFs drew Rs 6,181 crore, while index fund inflows touched Rs 1,929 crore. Overseas fund-of-funds saw inflows of Rs 814 crore during the month.
Meanwhile, 18 new fund offerings (NFOs) were launched in October, raising Rs 6,062 crore. Sectoral and thematic funds generated the most traction among new investors, accounting for Rs 2,489 crore of the month’s NFO mobilisation. This shows continued appetite for thematic exposure, albeit at a more measured pace compared to earlier months.
Industry voices say the shift reflects a balanced and maturing investment approach among retail investors.
“Equity inflows have moderated this month with a 19 per cent month-on-month decline, while the total flows in the market have gone up driven by inflows in the debt categories, primarily the liquid category,” said Suranjana Borthakur, Head of Distribution & Strategic Alliances, Mirae Asset Investment Managers (India). She noted that flexi-cap categories continue to draw steady inflows while hybrid and arbitrage funds are gaining traction as investors tactically park money for future equity deployment. “What remains most encouraging is the continued strength of SIP inflows, holding steady at around Rs 29,500 crore,” she added.
Echoing this view, Jatinder Pal Singh, CEO, ITI Mutual Fund, said the slowdown in inflows is not a sign of weakened investor sentiment but rather portfolio rotation. “Flexicap funds emerged as the top investor preference… while mid-cap and small-cap categories saw reduced momentum due to elevated valuations and profit booking.”
Industry observers also highlight broader structural growth indicators. Ram Medury, Founder & CEO, Maxiom Wealth, pointed out that industry AUM rose 5.6 per cent month-on-month to Rs 79.87 lakh crore. “Despite equity moderation, retail participation has hit a record 25.6 crore folios, and SIP contributions have surged 45 per cent year-on-year,” he said, signalling sustained long-term confidence.
Overall, the October data suggests that Indian investors are not exiting equities but taking a more selective and risk-aware approach — staying disciplined through SIPs, reallocating tactically, and balancing portfolios to weather short-term uncertainty while keeping long-term wealth creation in sight.