Equity mutual funds inflows decline over 6% to `28,054 crore in December

New Delhi: Equity mutual funds attracted Rs 28,054 crore in December, marking a decline of over 6 per cent from the preceding month, primarily due to profit booking by investors.

The easing of equity inflows coincided with a marginal contraction in the mutual fund industry’s overall asset base with the Assets Under Management (AUM) slipping to Rs 80.23 lakh crore in December from Rs 80.80 lakh crore in November, reflecting the impact of heavy withdrawals from debt schemes, according to data released by industry body Amfi on Friday.

“The moderation in industry’s AUM was primarily driven by debt fund outflows for liquidity management and limited market-related value changes,” Venkat N Chalasani, CEO of Amfi, said.

Overall, the mutual fund industry reported net outflows of Rs 66,591 crore during the month, largely on account of steep redemptions from debt schemes, even as equity and gold funds continued to draw investor interest.

While equity inflows softened sequentially from Rs 29,911 crore in November, though it remained higher than Rs 24,690 crore in October, the data showed.

Flows in equities remained resilient despite intermittent market volatility, supported by steady Systematic Investment Plan (SIP) contributions and continued confidence in India’s long-term growth outlook.

Retail participation via SIPs rose to an all time high of Rs 31,000 crore in December from Rs 29,445 crore in November, suggesting their preference for disciplined and long-term wealth creation strategies.

“The data suggests that investors have consistently used market corrections as opportunities to invest more. Total SIP contributions of Rs 3.34 lakh crore in CY25 reflect long-term intent and confidence, rather than short-term speculation,” said Feroze Azeez, Joint CEO, Anand Rathi Wealth.

The moderation in equity flows to some extent could be attributed to the cooling momentum in the mid-cap and more specifically in the small-cap category, during the month, where inflows tapered after a strong run-up in valuations and periodic market corrections, Himanshu Srivastava, Principal Research, Morningstar Investment Research India, said.

According to him, investors appear to be adopting a more selective and disciplined approach in these segments, balancing return expectations with valuation comfort. Additionally, markets remained volatile during the period, prompting investors to capitalize on profit-booking opportunities as and when they arose.

Most equity sub-categories continued to see positive traction in December, barring dividend yield and ELSS (equity-linked saving schemes) funds. Flexi-cap funds emerged as the top performer with net inflows of Rs 10,019 crore, up from Rs 8,135 crore in November, highlighting their growing appeal in uncertain market conditions.

This was followed by mid-cap funds at Rs 4,176 crore, large & mid-cap funds at Rs 4,094 crore and small-cap funds at Rs 3,824 crore. Besides, large-cap funds attracted inflows of Rs 1,567 crore.

In contrast, ELSS and dividend yield funds recorded net outflows of Rs 718 crore and Rs 254 crore, respectively, pointing to profit-booking and seasonal tax-related adjustments.

Amid this divergence, investors also showed renewed interest in safe-haven assets. Gold exchange-traded funds (ETFs) saw net inflows surge to Rs 11,647 crore in December, sharply higher than Rs 3,742 crore in November and Rs 7,743 crore in October.

“Gold ETFs recorded their highest ever inflows after gold delivered more than 70 per cent returns in CY25, pointing to some recency bias,” Anand Rathi Wealth’s Azeez said. Apart from equities and Gold ETFs, hybrid funds saw net inflows of Rs 10,756 crore in December.

On the other hand, debt mutual funds witnessed a massive outflow of Rs 1.32 lakh crore in December, significantly higher than the net outflow of Rs 25,693 crore recorded in November, reflecting pronounced year-end treasury activity and evolving interest-rate expectations.

The sharp increase in redemptions was primarily driven by heavy withdrawals from liquid, money market, and ultra-short duration funds, as corporates and institutional investors drew down surplus cash for quarter- and year-end requirements, including advance tax payments, balance-sheet adjustments, and working-capital needs, Morningstar’s Srivastava said. Such seasonal outflows are typical in the December quarter and do not indicate structural weakness in debt fund demand, he added.