Mutual fund equity buying in October lowest in six months at ₹17,778 cr

Equity deployment by mutual funds drops sharply as inflows moderate and fund managers turn cautious amid rising valuations and profit booking

Equity market deployment by mutual funds (MFs) fell to a six-month low in October, indicating a slowdown in fresh inflows into equity MF schemes as the market recovers. 

MFs deployed a net ₹17,778 crore in equities last month (as on October 30), compared with ₹46,442 crore in September and ₹70,534 crore in August, according to data from the Securities and Exchange Board of India (Sebi). 

Experts attributed the decline in equity deployment to profit booking and rising valuation concerns, with stock prices nearing record highs. 

“The net inflows into MF schemes may also have been lower last month, with investors booking profit and taking a more measured approach amid elevated valuations. Fund managers could also be in a wait-and-watch mode due to the ongoing earnings season, preferring to assess company performance before deploying fresh capital,” said G Chokkalingam, founder of  Equinomics Research. 

The quantum of money that MFs invest largely depends on the pace of inflows and outflows across active, passive, and hybrid schemes. Changes in cash positions and adjustments in the equity allocation of hybrid funds also impact overall deployment levels.

 

Some fund managers have been voicing concerns about investing in markets that are trading at elevated valuations amid incessant flows into equity schemes.

 

Net inflows into active equity schemes have moderated since hitting an all-time high of ₹42,702 crore in July. In September, investors had put in ₹30,422 crore. The decline has largely been attributed to profit booking as markets recovered from the March 2025 lows.

 

The market recovery continued in October, taking benchmark indices close to their all-time highs. The Nifty 50 and the Sensex gained about 4.5 per cent each during the month, marking their biggest monthly gains in seven months, supported by improved corporate earnings in the September quarter and steady foreign portfolio inflows.

 

The outlook for domestic equities, however, remains mixed.

 

“The earnings-valuation matrix remains relatively unfavourable, which helps explain why FPIs have still shied away. Internally, a high volume of promoter sale and IPOs has created a supply overhang. Declining return on equity (RoE) amid rising capital requirements for growth, along with lack of high-tech leaders, has weighed on the Indian market. However, high-frequency indicators point to some uptick in real sectors,” ASK Private Wealth said in a report.

 

ICICI Securities said in a note that Nifty 50 ran up by a brisk 5 per cent in October 2025 and 9 per cent in 2025, which, in a low nominal-growth environment, sets the stage for a phase of moderate returns until incremental positive growth surprises emerge.

 

“Despite modest gains, India’s stock performance is lagging most global markets this year, as valuations, despite moderating, are still elevated,” it stated.