Mutual Fund boom: Equity inflows surge 81%, debt sees ₹1 lakh cr turnaround

In July 2025, the open-ended debt mutual funds witnessed a strong rebound recording net inflows of Rs 1.07 lakh crore, a sharp turnaround from the muted Rs 1,711 crore outflow in June.

 Equity mutual fund inflows surged 81% in July to a record ₹42,702 crore. Systematic Investment Plan (SIP) contributions also reached a new high at ₹28,464 crore, showcasing renewed investor optimism and financial resilience, shows data released by Association of mutual funds in India.

 

"Equity-oriented mutual funds registered a record-breaking performance in July 2025, garnering net inflows of Rs 2,702 crore, the highest-ever monthly tally for the segment. This was a sharp rise from INR 23,587 crore in June 2025, underscoring a clear resurgence in domestic risk appetite. Intermittent market corrections during the month on the back of tariff war with the US as well as ongoing geopolitical tension, which offered investors attractive entry points," said  Himanshu Srivastava, Principal, Manager Research, Morningstar Investment Research India.

 

Among categories, Sectoral/Thematic funds topped the charts with net inflows of Rs 9,426 crore, propelled by the launch of seven new schemes that collectively mobilized Rs 7,404 crore. While investor interest in this segment seems to be coming back and remains strong, it is important to note the higher inherent risks of concentrated thematic bets, warranting alignment with individual risk profiles.

 

Flexi-cap funds followed with Rs 7,654 crore in net inflows, supported by their versatile mandate to capture opportunities across market capitalisations, which continues to resonate with investors.

 

Broader market-oriented categories also recorded robust traction. Small-cap funds drew Rs 6,484 crore, Mid-cap funds Rs 5,182 crore, and Large & Mid-cap funds Rs 5,035 crore. Except for ELSS, which saw net outflows of Rs 368 crore, all other equity categories reported positive flows.

 

Srivasta explains 3 key themes defined the month’s trend:

 

1.       Resilient retail SIP momentum – Monthly SIP collections touched a record Rs 27,269 crore in June, with this momentum sustaining into July, providing a stable base of inflows across categories.

 

2.       Supportive market environment – Strong corporate earnings, a steady macroeconomic backdrop, and expectations of a gradual monetary easing cycle kept investors engaged, particularly in growth-oriented categories such as flexi, mid, and small caps.

 

3.       Seasonal tax-related redemptions – ELSS redemptions, a post–March/April pattern, weighed on flows in the category, making it the only equity segment to close the month in net outflow territory.

 

Key Highlights

 

Equity Inflows Up 81%: Fund houses reported equity mutual fund net inflows of ₹42,702 crore, up from ₹23,587 crore in June and surpassing ₹37,113 crore in July 2024. 

 

SIP Contributions Break Records: Monthly SIP flow climbed to ₹28,464 crore, a 4% increase over June’s ₹27,269 crore, reaffirming the popularity of disciplined investing. 

 

Mutual Fund AUM Climbs: Total assets under management stood at ₹75.10 lakh crore, up 1% from June and 16% year-on-year

 

Equity Category Buzz

Top Performers: Sectoral/thematic funds led inflows with ₹9,426 crore, followed by flexi-cap funds with ₹7,654 crore. Thematic inflows skyrocketed 1,882% month-on-month. 

 

Mid- & Small-Cap Funds Gain Traction: Small-cap inflows jumped 61% to ₹6,484 crore, while mid-cap inflows rose 38% to ₹5,182 crore. Large-cap funds posted a modest 25% uptick to ₹2,125 crore.

 

ELSS Sees Outflow: Equity-linked Savings Schemes (ELSS) were the only category with net outflows, totaling ₹368 crore, lighter than June’s ₹556 crore.

 

Other Fund Categories in Focus

 

Debt Funds Bounce Back: After two months of withdrawals, debt schemes saw ₹1.06 lakh crore of net inflows. Money market and liquid funds accounted for nearly ₹84,000 crore combined.

 

 The rebound was led by robust allocations into institutional-heavy categories, particularly Money Market and Liquid Funds, supported by healthy participation in Overnight Funds.

 

Money Market Funds emerged as the top gainer, drawing Rs 44,573 crore, its strongest monthly tally in recent times building on consistent demand over the past few months. The category has now added nearly Rs 97,000 crore over the last quarter, underscoring its appeal as a preferred parking avenue for surplus capital. 

 

Liquid Funds also staged a turnaround with net inflows of Rs 39,354 crore. Overnight Funds saw inflows of Rs 8,866 crore after two months of outflows. Inflows in the Liquid and Money Market segments were further bolstered by new fund launches—JioBlackRock Liquid Fund (Rs 8,917 crore)and JioBlackRock Money Market Fund (Rs 6,285 crore) which garnered sizeable investments and contributed meaningfully to the July month’s strong headline flows.

 

 Flows in other categories were mixed. Ultra Short Duration Funds and Low Duration Funds posted inflows of Rs 2,277 crore and Rs 9,766 crore, respectively, reflecting sustained appetite for low-duration carry strategies. Corporate Bond Funds continued to see interest, garnering INR 1,421 crore, supported by attractive spreads and stable credit sentiment. Gilt Funds registered inflows of INR 1,050 crore, reversing the redemptions seen in June.

 

 Ultra Short Duration Funds and Low Duration Funds posted inflows of Rs 2,277 crore and Rs 9,766 crore, respectively, reflecting sustained appetite for low-duration carry strategies. 

 

Corporate Bond Funds continued to see interest, garnering Rs 1,421 crore, supported by attractive spreads and stable credit sentiment. Gilt Funds registered inflows of Rs 1,050 crore, reversing the redemptions seen in June.

 

 "However, select segments remained under pressure. Banking & PSU Funds witnessed the highest outflows within the fixed-income space at INR 662 crore. Credit Risk Funds saw outflows of Rs 221 crore indicating investor reluctance toward lower rated credits despite improving corporate balance sheets. While Long Duration Funds also witnessed redemptions of INR 416 crore as uncertainty over the timing and magnitude of monetary easing kept duration-heavy bets in check," said Nehal Meshram, Senior Analyst - Manager Research, Morningstar

 

"Debt-oriented schemes saw a massive turnaround with net inflows of ₹1.07 lakh crore. The strong inflows into debt funds suggest renewed investor confidence amid potential rate shifts. This may continue if interest rates stabilize or if yield curves offer attractive risk-adjusted returns. Additionally, with the RBI’s recent rate action, bank deposit rates are dropping, resulting in renewed demand for fixed income funds. With equity inflows accelerating—especially into small-, mid-, and sectoral/thematic funds—investors are clearly seeking higher-return, growth-aligned segments despite volatility risks. The spike in equity inflows could also be fueled by tactical responses to macro triggers, such as dips due to trade tensions or subdued earnings outlooks. Sustaining this level of interest may depend on whether markets continue to display similar favorable sentiment," said Ankur Punj MD and National Head Equirus Wealth.

 

Hybrid Funds Dip 10%: These received ₹20,879 crore, down from ₹23,222 crore in June. Within the category, arbitrage and multi-asset allocation funds led inflows.

 

The hybrid segment continues to appeal to investors seeking a balance of growth potential and volatility cushioning. 

 

"The dip in hybrid fund flows hints that investors may be prioritizing either aggressive equity plays or safe debt alternatives. Continued confidence in multi-asset funds suggests investor confidence in commodities apart from equity and debt. If volatility continues, we are likely to see more flows towards balanced and multi-asset funds as a risk-off strategy. The surging popularity of passive instruments and sustained SIP inflows signal a structural shift toward cost-efficient, long-term investing strategies," said Punj.

 

Passive Funds Surge Over 100%: ETFs and index funds attracted ₹8,259 crore, more than doubling from June’s figure.

 

New Fund Offers & Gold ETFs

NFO Bonanza: Around 30 new open-ended funds raised ₹30,416 crore. Debt NFOs were the largest contributor. 

 

Gold ETFs Dwindle: Gold ETF inflows dropped to ₹1,256 crore, while other ETFs grew significantly, signaling a move toward alternative passive investments.

 

Overall, July marked one of the strongest months for fixed-income flows in FY 2025 so far, pushing year-to-date net inflows beyond INR 2.28 lakh crore. The breadth of inflows across money market, liquid, and corporate bond segments points to sustained investor appetite for yield-carry opportunities, even as duration bets remain selective.

 

"Fixed income is changing colour, with liquid funds seeing strong competition from money market funds. The category crossed Rs. 3.37 lakh crore in AUM and garnered nearly Rs. 42,000 crore in net flows, accounting for a third of all fixed income inflows in the financial year to date. Arbitrage is softening in terms of flows, while gold continues to find favour among investors due to its performance and outlook," said Anand Vardarajan, Chief Business Officer, Tata Asset Management.