Mutual fund growth holds ground in Q2 as inflows defy market weakness

Average AUM growth in Q2 holds at 7% to cross ₹77 trillion

The domestic mutual fund (MF) industry continued to expand its asset base during the July–September quarter of 2025–26 (Q2), driven by a resurgence in equity fund flows and a higher pace of investments in debt and hybrid schemes.

 

Industry-managed assets stood at ₹77.1 trillion in Q2, up nearly 7 per cent from ₹72.1 trillion in the previous quarter (April–June/Q1).

 

The pace of growth in quarterly average assets under management (AUM) in Q2 remained on a par with the previous quarter, despite a relatively subdued equity market. The benchmark NSE Nifty 50 index ended the quarter down 3.6 per cent, compared to an 8.5 per cent rise in Q1.

 

AUM growth depends on two variables: the quantum of fresh flows and the impact of market movements on the valuation of underlying securities. 

 

The lack of mark-to-market gains was offset, to some extent, by a pickup in equity fund inflows. Active equity schemes garnered net inflows of ₹76,133 crore in the first two months of Q2, compared with ₹66,869 crore in net investments during the entire Q1.

 

Equity MF schemes have attracted strong inflows even as their near-term performance has weakened. Experts attribute the robust inflows to systematic investment plans (SIPs).

 

“Volatility has helped SIPs deliver better returns than lump-sum investments, thanks to the effects of rupee cost averaging. SIP investors in largecap funds posted average gains of over 4 per cent in the one-year period ending September 2025, even as the Nifty 50 fell 4.65 per cent. Incidentally, SIPs account for 60 per cent of gross equity flows into MFs. Investor sentiment has not been affected by one-year underperformance, as the three-year performance still shows strong double-digit returns,” said market expert Sunil Subramaniam.

 

Continued inflows into debt and hybrid funds also contributed to overall AUM growth. In the first two months of Q2, debt funds attracted nearly ₹1 trillion in inflows. During the same period, hybrid schemes raked in over ₹36,000 crore, while passive funds received around ₹20,000 crore.