Mutual funds pour ₹8,752 cr in IPOs in Q2 FY26; small-cap bets stay strong

9 Mid caps to Possibly become Large caps; 6 Small caps to possibly become Midcaps

India’s mutual fund industry continued its aggressive backing of new-age companies and emerging sectors in the September 2025 quarter, deploying over ₹8,752 crore into recently listed stocks — with a strong tilt toward small-cap IPOs, according to a study by Ventura.

 

The analysis shows that 10 out of the 11 top IPO investments made by mutual funds were in small-cap companies, signaling sustained appetite for scalable, early-stage businesses even in a volatile market. Only one name — Anthem Biosciences — qualified as a mid-cap.

 

Top IPO picks by mutual funds in Q2 FY26 

Note: Companies with a market value above Rs. 20 Crore have been considered. From those, the top 10 according to market value are considered.

 

(Top 10 filtered on MF holding by market value above ₹20 crore)

 

The numbers highlight a continued preference for new-economy, high-growth businesses despite the recent correction in broader markets.

 

Who could move up the market-cap ladder?

 

Ventura also flagged nine mid-caps that could graduate to large-cap status and six small-caps that could shift into mid-cap territory in AMFI’s next classification update — cementing the case for continued investor interest in the mid-small segment. 

Mid Cap that could become Large Cap

 

Market turbulence visible in flows

 

While equity markets softened sharply in the quarter — Nifty50 fell 3.6%, small and mid-cap indices dropped 4.6% and 4.1%, respectively — institutional flows showed a stark divergence:

 

In H1 FY26:

 

FIIs saw ₹37.9 billion outflows (vs ₹89.7 billion inflows last year)

 

DIIs pumped in ₹362.7 billion (vs ₹232.4 billion last year)

 

Domestic institutions clearly cushioned the fall in a volatile quarter as global risk-off flows intensified.

 

MF industry trends: SIPs hit record high

 

During the September quarter:

 

• Equity schemes saw inflows of ₹1.06 lakh crore (vs ~₹66,869 crore last quarter)
• Debt schemes saw ₹3,156 crore outflow (vs ₹2.01 lakh crore inflow earlier)
• Hybrid schemes saw ₹45,570 crore inflow (vs ₹58,235 crore)
• SIP inflows hit an all-time high at ₹29,361 crore/month in September, up from ₹27,269 crore in June — reflecting retail investor resilience despite market volatility.

 

Small-cap flows cool

 

Small and mid-cap equity funds saw a sharp growth slowdown in AUM due to corrections in underlying indices:

 

• Category Previous Qtr AUM Growth Q2 FY26
• Small-Cap 20% 0.6%
• Mid-Cap 17% 0.4%

In the current quarter, Small Cap and Mid Cap categories saw a sharp slowdown—from 20% and 17% to just 0.6% and 0.4%

 

The moderation comes after SEBI warnings on froth in pockets of the small-cap market and a risk-off shift in global equities.

 

Why it matters

 

• Mutual funds are still betting on India’s next-gen companies, despite market volatility.
• Domestic investors are driving equities, balancing FII outflows.
• Retail participation is deepening, as SIPs scale fresh highs month after month.
• For investors, this suggests a maturing market where capital continues to chase innovation, long-term growth, and domestic resilience — even when global capital turns cautious.