Equity MF inflows down 19%; flexi-caps dominate, thematic funds lose steam

Cash moves back to debt MFs as equity inflows soften; gold ETFs see ₹7,743 crore

Indian equity mutual fund inflows eased for the third straight month in October 2025, signalling investor caution amid sharp market rallies, festive spending, and rising valuations across broader markets.

 

According to AMFI data, equity fund inflows fell 19% month-on-month to ₹24,690 crore, down from ₹30,422 crore in September, even as overall flows remained strong in absolute terms. Total MF industry AUM climbed to ₹79.87 lakh crore in October from ₹75.61 lakh crore in September, with equity AUM touching ₹35.16 lakh crore.

 

Despite the moderation, fund houses and analysts say domestic investor participation remains firmly intact — but with a clear tilt toward diversification and quality.

 

 

Profit-booking & seasonality” behind moderation: Morningstar

 

Explaining the three-month trend of cooling flows, Himanshu Srivastava, Principal Research, Morningstar Investment Research India, said:

 

“Equity-oriented mutual fund categories recorded net inflows of ₹24,690 crore in Oct 2025. While it’s a decent net inflow in absolute terms, it was lower than ₹30,422 crore in September. This was the third consecutive month witnessing moderation.

 

The moderation could be attributed to profit-booking given the sharp surge in equity markets along with festive season spending. While the pace softened, the trend continues to reflect sustained investor confidence in equities.”

 

Flexi-cap funds lead; mid & small caps soften

 

Flexi-cap funds were the clear winners for the third month in a row, attracting ₹8,928 crore (up from ₹7,029 crore in September).

 

“Investors preferred broad, manager-driven diversification across market caps. This also highlights investors’ preference for funds that could provide them with exposure across market caps.” said Srivastava.

 

“One new flexi-cap NFO collected ₹1,684 crore.”

 

Inflows into mid and small caps slow

Inflows into mid-caps (₹3,807 crore) and small-caps (₹3,476 crore) slowed due to valuation froth and recent volatility.

 

Dividend yield funds (–₹178 crore) and ELSS funds (–₹665 crore) posted outflows due to profit-taking and tax-seasonality.

 

Sectoral/thematic funds saw ₹1,366 crore net inflows — however, ₹2,489 crore came from four new NFOs.

 

“Excluding NFOs, the category would have seen net outflows, indicating a moderation after strong thematic rallies,” Srivastava added.

 

Overall, 18 open-ended NFOs mobilised ₹6,062 crore in October.  Sectoral is flavour of season

 

"Sectoral and thematic funds — which have remained the flavour of the season for quite some time — registered net inflows of about ₹1,366 crore in October. However, this was largely driven by the launch of four new fund offerings, which together mobilised around ₹2,489 crore. Excluding these new launches, the category would have actually seen net outflows, indicating a slowdown in investor enthusiasm. The moderation suggests that investors engaged in some profit-booking and have turned more selective after the strong cyclical and theme-based rallies that fueled record subscriptions in earlier months," explained Srivastava.

 

Debt funds roar back with ₹1.60 lakh crore inflows

 

Debt funds staged a sharp turnaround, recording ₹1.60 lakh crore inflows, after ₹1.02 lakh crore outflows in September — largely due to institutional money returning post quarter-end redemptions.

 

Nehal Meshram, Senior Analyst, Morningstar India, noted:

 

“The turnaround was driven by robust inflows into liquid and overnight funds. Liquid funds saw ₹89,375 crore inflows, reversing September’s ₹66,042 crore outflows. Overnight funds attracted ₹24,051 crore, as institutions redeployed surplus cash.”

 

Fixed-income investors are also positioning ahead of expected rate pivots in 2026. 

Money market funds, too, rebounded strongly, garnering Rs 17,916 crore, underscoring the return of institutional cash balances to short-term vehicles.

 

Flows in the short-duration segment also rebounded strongly after last month’s heavy redemptions, as investors redeployed money across accrual-oriented categories amid comfortable liquidity and attractive yields.  "The recovery was led by ultra-short and low-duration funds, while corporate bond funds continued to show steady traction with inflows of Rs 5,121 crore. In contrast, credit risk funds remained weak, highlighting investors’ continued caution toward lower-rated exposures" said Meshram.

 

 Among the longer-duration categories, activity remained subdued but selective. Dynamic bond funds reported minor outflows of Rs 232 crore after two months of positive traction, whereas medium to long duration funds saw a marginal inflow of Rs 17 crore, suggesting investors are yet to make meaningful duration calls ahead of policy clarity. Gilt funds remained weak, registering outflows of Rs 931 crore, as volatility in long-term yields persisted amid shifting global rate expectations.

 

"Overall, October’s flows signal a return of liquidity driven institutional allocations rather than a structural shift in investor preference. The recovery in short-term and high-quality segments underscores confidence in the current rate environment and comfortable system liquidity. Going forward, fund flows are likely to remain concentrated in liquid, money market, and high-quality accrual categories, with investors awaiting more clarity on the timing and pace of future rate cuts before extending duration exposure," said Mehram.

 

Gold ETFs hold ground as geopolitical hedge

 

Gold ETFs continued their strong run with ₹7,743 crore inflows in October after a record ₹8,363 crore in September.

 

Meshram said:

 

“Consistent inflows reflect gold’s role as a hedge amid geopolitical risks, global rate uncertainty, and currency volatility. Investors are using gold tactically to preserve wealth and diversify exposure.”