Inflow in equity mutual funds surges 56% to `40,450 cr in March despite market volatility

New Delhi: Equity mutual funds witnessed a net inflow of Rs 40,450 crore in March, marking an increase of 56 per cent from the preceding month, reflecting sustained investor confidence despite market volatility and heightened geopolitical tensions.

This was the highest monthly net inflow after July 2025, when the equity-oriented mutual funds received a net inflow of Rs 42,702 crore.

“The surge in inflows reflects sustained retail engagement through SIP contributions, year-end portfolio allocations, and investors using recent market corrections as an opportunity to deploy incremental capital into equities,” Himanshu Srivastava, Principal Research, Morningstar Investment Research India, said.

Umesh Sharma, CIO-Debt, The Wealth Company Mutual, said the inflow rose sharply following the post-correction phase in equity markets after the onset of the West Asia conflict created more attractive investment opportunities.

Moreover, monthly contributions through SIPs (Systematic Investment Plans) rose to an all-time high of Rs 32,087 crore from Rs 29,845 crore in the preceding month, highlighting the growing preference for disciplined, systematic investing, according to the data released by the Association of Mutual Funds in India (Amfi).

Venkat Chalasani, Chief Executive at AMFI, said the inflow reflects sustained investor confidence in long-term wealth creation through mutual funds. “India’s structural growth story remains strong, and investors continue to align their investments with long-term financial goals”.

Overall, the mutual fund industry recorded a net withdrawal of Rs 2.4 lakh crore in March after witnessing an inflow of Rs 94,530 crore in February. This was largely driven by a huge outflow of Rs 2.95 lakh crore in debt funds.

March typically witnesses a surge in outflows due to higher redemptions, particularly from debt mutual funds, as companies redeem money from liquid funds to meet year-end commitments.

“However, this is just a temporary blip, and industry is likely to witness a surge in inflows in the coming months backed by India’s strong macroeconomic fundamentals and valuations of domestic equities looking favourable,” Ankur Punj, MD & Business Head, Equirus Wealth.

The outflow has pulled the industry’s assets under management to Rs 73.73 lakh crore in March-end from Rs 82.03 lakh crore in February-end.

“The AUM decline is a mark-to-market story driven by a sharp equity market correction during the month, not a confidence story. The net outflow is almost entirely driven by debt fund redemptions, which is a well-established quarter-end phenomenon in March,” said Nitin Agrawal, CEO, Mutual Funds, InCred Money.

According to data, equity inflows rose to Rs 40,450 crore in March from Rs 25,978 crore in February. This was also the 61st consecutive month of positive net inflows.

The positive flows were largely driven by strong participation in Flexi Cap, Mid Cap and Small Cap funds, which together accounted for a significant share of the total net additions.

Within the equity segment, Flexi Cap funds led the category with net inflows of over Rs 10,000 crore, followed by Small Cap funds at Rs 6,263 crore and Mid Cap funds at Rs 6,063 crore.

While most categories recorded positive flows, Dividend Yield and Equity Linked Savings Scheme (ELSS) funds saw marginal outflows due to some profit booking or portfolio rebalancing.

Apart from equities, hybrid schemes reported net outflows of nearly Rs 16,500 crore, largely driven by Arbitrage Funds, which alone saw outflows of Rs 21,000 crore. In contrast, Multi-Asset Allocation Funds registered inflows of over Rs 5,000 crore, suggesting a preference for diversified asset allocation strategies amid heightened global uncertainty.

Meanwhile, gold exchange-traded funds saw inflows of Rs 2,266 crore in March, which was much lower than the Rs 5,255 crore seen in February and Rs 24,040 crore in January. While the pace of inflows has moderated sequentially, investor interest in gold-backed products remained positive.

“The slower inflows in March likely reflect a combination of normalization after a very strong start to the year and some moderation in fresh allocations. January had seen unusually elevated inflows, likely supported by strong risk aversion, portfolio rebalancing, and momentum in gold prices, making subsequent monthly numbers look softer by comparison,” said Nehal Meshram, Senior Analyst, Morningstar Investment Research India.

On the other hand, debt funds saw an outflow of Rs 2.95 lakh crore in March as compared to a Rs 42,106 crore inflow in February.

The sharp reversal in debt fund flows in March was driven largely by heavy redemptions from short-term and liquidity-oriented categories. Liquid Funds saw the biggest outflows at Rs 1.35 lakh crore, followed by Overnight Funds at Rs 40,228 crore, Money Market Funds at Rs 29,207 crore, and Low Duration Funds at Rs 25,227 crore.