Hybrid mutual fund schemes' inflow moderates in FY25 amid market turbulence

Hybrid mutual fund schemes attracted Rs 1.19 lakh crore in 2024-25, 18 per cent lower than the preceding fiscal, owing to market turbulence in the second half of FY25 triggered by corporate earnings slowdown and geo-political tensions.

Despite the moderation in inflow, the category has seen a robust increase in both the number of investors and assets under management (AUM) during FY25 compared to those in the preceding fiscal, data with the Association of Mutual Funds in India (Amfi) showed. 

A key factor contributing to this resilience is the drawdown protection provided by the debt component of hybrid schemes.

"The drawdown protection offered by the debt component of hybrid schemes is a key reason, as it allows investors to stay invested without the stress that comes with pure equity volatility. The NAVs (net asset valued) of hybrid funds typically experience lower drawdowns compared to equity funds, making them a preferred choice for investors seeking a more stable journey," Trivesh D, COO of Tradejini, said.

Hybrid mutual funds schemes have experienced an increase in the number of investors, with the number of folios reaching 1.56 crore in March 2025 from 1.35 crore a year earlier, adding an investor base of more than 33 lakh.

This shows investors' inclination for hybrid funds.

This was complemented with assets under management (AUM) of the category increasing to Rs 8.83 lakh crore as of March 2025 from Rs 7.23 lakh crore in FY24, showing a 22 per cent growth. Overall, the industry added more than Rs 12 lakh crore to a record AUM of Rs 65.74 lakh crore as of March 2025.

Hybrid funds are mutual fund schemes that typically invest in a combination of equity and debt securities and sometimes in other asset categories such as gold.

According to the industry data, the hybrid category saw net inflows of Rs 1.19 lakh crore in FY25 compared to an inflow of Rs 1.45 lakh crore in FY24. However, the category experienced an outflow of Rs 18,813 crore in FY23.

"We have seen a slight dip in net inflows from Rs 1.45 trillion in FY24 to Rs 1.19 trillion in FY25. The slowdown in inflows majorly happened in second half of the FY25 due to market turbulence driven by corporate earnings slowdown, election uncertainty and geopolitical tensions and another major reason was dip in NFOs in this category," Feroze Azeez, Joint CEO, Anand Rathi Wealth Ltd, said.

FY24 higher inflows in this category was driven by higher NFO (New Fund Offer), with 21 NFOs in FY24, whereas in FY25, the NFO count declined to 12, which led to slower inflows, he added.

Hybrid funds appeal more to investors with a moderate or low-risk profile. These funds are good investment options as they reduce the volatility associated when participating in equity markets while simultaneously providing stability in the fixed-income market.

Additionally, huge interest was garnered by hybrid schemes following a change in taxation for debt funds.

Looking ahead to FY26, with rate cycle uncertainty, global risk-off cues, and elevated domestic valuations, Trivesh of Tradejini believes investors will prioritise funds that offer both growth and cushion.

Anand Rathi Wealth's Azeez recommended investors to build a strategy-based portfolio with an 80:20 asset mix across equity and debt, which helps ride volatile markets comfortably as it reduces the volatility and improves the stability and liquidity in the portfolio.