MUMBAI: Despite remaining in the green zone, the mutual funds industry reported declining trends in net inflows in almost all categories. Net inflows into equity schemes sharply declined 22% in August, and the for-long-red-hot SIPs witnessed a marginal 1% decline in inflows, thus pulling down the overall industry AUM marginally.
The declines are nothing to worry about, according to fund managers, as the July inflows were exceptionally high, rising over 80% on-month and setting an unusually elevated benchmark that was unlikely to be sustained. Also, after the aggressive allocations in July, especially in sectoral and thematic funds, which recorded their highest-ever monthly inflows, some moderation in fresh investments was expected, they said.
August showed net equity inflows declining by 22% to Rs 33,430 crore from Rs 42,702.35 crore in July and Rs 23,587 crore in June, the industry lobby Amfi said Wednesday. This marks the 54th consecutive month of positive equity flows, underlining consistent investor appetite.
On the other hand, SIP inflows were down to Rs 28,265 crore in the reporting month, a slight decline of 1% from July, yet asserting that SIPs remain a preferred investment route for retail investors. In July the inflows were the highest at Rs 28,464 crore.
Due to the losses in equities, the industry’s overall assets under management also declined marginally to Rs 75.18 trillion from Rs 75.35 trillion in July and Rs 74.41 trillion in June, Amfi said.
A total of 23 schemes were launched in August, all open-ended and across categories, raising a total of Rs 2,859 crore, compared to Rs 30,416 crore raised by 30 new schemes in July.
On the debt side, open-ended funds reported net outflows of Rs 7,980 crore only, much lower than the Rs 1,06,801 crore in July; hybrid funds also declined to Rs 15,293 from Rs 20,879 crore; inflows into small-cap funds fell to Rs 4,992 crore from Rs 6,484 crore while those into large-cap funds rose to Rs 2,834 crore from Rs 2,125 crore and so did inflows into mid-cap schemes which rose to Rs 5,330 crore from Rs 5,182 crore.
Inflows into multi-asset allocation funds almost halved to Rs 3,527 crore from Rs 6,197 crore and arbitrage funds declined to Rs 6,666 crore from Rs 7,295 crore.
Akhil Chaturvedi, executive director of Motilal Oswal Asset Management, said, “The lower impact of new flows viz previous month roughly Rs 9,000 crore is to the extent of NFOs which were higher in July than August. Barring this, the inflow momentum is steady and healthy."
On the surprise decline in SIPs, Chaturvedi said he was hoping for higher inflows, but it was flat. "But broadly, our investors continue to add equities to their allocation despite global headwinds and FPI selling, and this is very positive for the markets,” he said.
Nehal Meshram, senior analyst with Morningstar India, said gold ETFs saw healthy net inflows of Rs 2,190 crore, up from Rs 1,256 crore in July and extending the positive streak to four consecutive months.
The steady demand reflects the enduring appeal of the metal as both a portfolio diversifier and a tactical hedge amid ongoing global macroeconomic uncertainties, he said, adding that with this the cumulative investments into ETFs surpassed Rs 5,648 crore so far in 2025.
On the sharp reversal in inflows from open-ended debt funds, which saw net outflows of only Rs 7,980 crore in August as against inflows of a whopping Rs 1.07 trillion in July, Meshram said the decline was primarily driven by significant redemptions in the liquid funds, which saw a pullback after last month’s surge. Institutional investors trimmed allocations ahead of advance tax payments and quarter-end liquidity needs, underscoring the category’s sensitivity to short-term cash management cycles.
According to Ankur Punj, managing director of Equirus Wealth, the 22% dip in equity inflows is more of a reflection of global macros than domestic factors, with tariff news heightening volatility in the markets leading to a cautious approach by investors.
With the GST rate cuts coupled with the massive income tax relief, we will see strong domestic consumption driving up corporate earnings going forward, he said.
Viraj Gandhi, chief executive of Samco Mutual Fund, attributed the decline in inflows into equity schemes to the slowdown in NFO activity in the month.