The silent reflex: In market quakes, mutual funds are the fault dampers

Steady capital flows prevent ruptures on volatile fault lines

Mutual fund (MF) investment in equities has stayed consistent, even as global trade developments stirred market volatility.

 

In July 2025, MFs purchased equities worth over ₹47,000 crore — an 8 per cent increase from the previous month’s figure.

 

This buying softened the blow to the market as foreign portfolio investors offloaded nearly ₹20,000 crore.

 

July saw turbulence in the equity market, with benchmark indices snapping a four-month winning streak that had pushed gains to nearly 15 per cent. Both the Nifty and Sensex closed the month down roughly 3 per cent. The broader Nifty Smallcap 100 and Nifty Midcap 100 indices dropped 6.7 per cent and 4 per cent, respectively, after surging more than 20 per cent each in the prior four months.

 

So far in 2025, MFs have injected ₹2.8 trillion into equities. During the seven months in 2024, total buying stood at ₹2.2 trillion.

 

The scale of net equity purchases by MFs largely hinges on net inflows into equity and hybrid schemes, alongside shifts in scheme cash holdings. Inflows into active equity schemes have cooled recently. In the first half of 2025, net inflows averaged ₹26,800 crore, down from ₹38,100 crore in the previous six months.