Gold, debt, flexi-cap funds attract investors in Jan, equity flows down 14%

If you invest in equity mutual funds, January 2026's data suggests investors are becoming more cautious — but not pulling out of markets.

 

According to data released by the Association of Mutual Funds in India, inflows into equity mutual funds declined for the second consecutive month, falling about 14% month-on-month to ₹24,029 crore in January 2026, compared with ₹28,054 crore in December 2025.

 

The slowdown came as markets turned volatile amid geopolitical tensions and global trade risks. During the month, benchmark indices Nifty 50 and Sensex fell about 3–3.5%, while mid-cap and small-cap indices declined even more.

 

At the same time, foreign investors pulled out roughly $4 billion from Indian equities, adding to market uncertainty.

 

 

"Equity-oriented mutual fund categories recorded net inflows of Rs 24,029 crore in January 2026, lower than Rs 28,054 crore in December, indicating a moderation in pace rather than any meaningful deterioration in investor sentiment. Flows remained constructive despite bouts of market volatility, supported by steady SIP contributions and continued confidence in the long-term structural growth prospects of Indian equities.

 

The moderation in overall inflows was largely driven by cooling momentum in the mid- and small-cap segments. While these categories continued to attract healthy absolute inflows of Rs 3,185 crore and Rs 2,942 crore respectively, the pace slowed sharply compared with the previous month, reflecting elevated valuations and recent corrections prompting investors to adopt a more cautious and selective approach. Some amount of profit booking after the strong performance seen over the past years also weighed on incremental allocations," said Himanshu Srivastava, Principal Research, Morningstar Investment Research India.

 

Key trends investors should know

1. SIP investing remains strong

 

Monthly SIP inflows stayed above ₹31,000 crore, showing that retail investors continue to invest regularly despite market volatility. 

 

2. Shift toward stability and diversification

 

Investors are gradually moving toward large-cap, flexi-cap and hybrid strategies, which offer diversification and relatively lower volatility compared with mid- and small-cap segments.

 

Flexi-cap funds saw the highest inflows at ₹7,672 crore, reinforcing investor preference for flexible portfolio allocation.

 

"Large-cap and focused funds also witnessed healthy traction in January, recording higher inflows compared with December. Both the categories garnered inflows of about Rs 2,005 crore and Rs  1,557 crore respectively. This suggests a gradual tilt toward quality, earnings visibility, and relatively stable portfolios amid an uncertain global backdrop.

 

Flexi-cap funds, continued to remain the largest category by assets and saw the highest net inflows in January at Rs 7,672 crore. This points towards investors preference for flexible investment options to capture investment opportunities across market segments. There was a moderation in flows however from December, possibly reflecting a wait-and-watch stance after sustained strong allocations in recent months," said Srivastava.

 

Sectoral and thematic funds, however, saw a pickup in net inflows during the month, suggesting selective tactical positioning by investors toward specific opportunities rather than broad-based risk taking. However, the quantum of flows in the recent months have come down significantly

 

Except for the ELSS category all the categories received net inflows suggesting a broader positive sentiment. Also there has been a significant slowdown in the NFO activity.

 

Overall, the flow trend suggests that equity participation remains structurally intact, but investor behaviour is becoming more balanced and risk-aware, with allocations gradually shifting toward stability, diversification, and valuation comfort rather than aggressive positioning in slightly riskier segments.

 

3. Mid- and small-cap enthusiasm cools

 

Mid-cap and small-cap funds continued to receive inflows — ₹3,185 crore and ₹2,942 crore respectively — but the pace slowed sharply compared with previous months.

 

4. Diversification into gold and multi-asset funds

 

Investors are increasingly diversifying portfolios.

 

January saw strong flows into gold and silver ETFs, index funds and multi-asset allocation funds, as investors looked for hedges against market volatility.

 

Multi-asset funds, in particular, continue to gain popularity as investors seek balanced exposure across equities, debt and commodities.

 

"Focused funds recorded the highest month-on-month increase, though absolute inflows remained modest at around ₹1,500 crore. Large-cap inflows rose nearly 28% compared to the previous month, while sectoral and thematic funds saw limited traction, with a large part of the ₹423 crore inflows coming through NFOs.

 

SIP inflows remained resilient above ₹31,000 crore. Hybrid funds gained momentum, with inflows rising over 61% month-on-month. Multi-asset funds led the segment with close to ₹10,000 crore of inflows, while balanced advantage and arbitrage funds also saw higher interest during the month," said Suranjana Borthakur, Head of Distribution & Strategic Alliances, Mirae Asset Investment Managers (India)

 

5. Debt funds see strong comeback

 

Debt mutual funds recorded ₹74,827 crore of inflows in January after heavy outflows in December.

 

Most of this money flowed into:

 

liquid funds

overnight funds

money market funds

 

"Debt-oriented mutual fund categories saw a sharp turnaround in January 2026, posting net inflows of Rs 74,827 crore, after the heavy net outflows of INR 1.32 lakh crore in December 2025. The reversal largely reflects post year-end cash redeployment as corporate and institutional investors reinvest surplus balances that were temporarily drawn down in December.

 

The recovery was overwhelmingly led by the liquidity segment.  This pattern is consistent with a normalization of treasury activity after December’s balance-sheet, tax, and year-end adjustments," said  Nehal Meshram, Senior Analyst, Morningstar Investment Research India

 

Beyond the core liquidity buckets, low-duration funds recorded Rs 4,779 crore of inflows, indicating continued preference for high-quality, short-maturity accrual with limited mark-to-market volatility.

 

That said, flows were not broad-based across debt categories. Several segments remained in the red, most notably corporate bond funds, which saw sizeable outflows of Rs 11,473 crore, likely reflecting institutional churn, profit-taking, and reallocation back to overnight/liquid after the year-end. Other outflows were seen in Dynamic bond (Rs 1,435 crore), Gilt (Rs 1,428 crore), and long-duration (Rs 1,336 crore) funds.

 

This suggests investors are parking money temporarily while waiting for better equity entry points.

 

"The key takeaway is the breadth of participation—investors are clearly using mutual funds across asset classes to meet distinct needs: long-term growth, liquidity management and portfolio diversification. Debt-oriented schemes added ₹74,827 crore in net inflows, showing strong preference for fixed income and liquidity products as part of overall asset allocation.

 

Passive and ETF-based products also saw meaningful participation. Gold ETFs posted net inflows of ₹24,040 crore, alongside ₹15,033 crore into index funds and other ETFs. This suggests investors are keeping gold as part of portfolios—both as a long-term allocation and as a hedge—while steadily increasing the use of transparent, market-linked products.

 

 For retail investors, the right approach is to stay diversified, match products to time horizon, and continue systematic investing rather than reacting to short-term market noise," said Saugata Chatterjee, President & Chief Business Officer, Nippon India Mutual Fund 

 

Overall, January’s inflows appear driven more by liquidity normalization and reinvestment flows than a decisive shift toward duration-led strategies, with investors still anchoring allocations in liquid, and low-volatility debt categories.

 

Gold:

 

Gold exchange-traded funds saw a sharp jump in inflows in January 2026, with the category recording Rs 24,040 crore, more than double December’s record-high Rs 11,647 crore. The surge suggests gold demand remained exceptionally strong, supported by continued investor preference for safe-haven and diversification exposure.

 

"Part of the strength likely reflects fresh allocations at the start of the year, as investors rebalance portfolios and add hedges after a volatile period across risk assets. Gold ETFs continue to benefit from their positioning as a regulated, liquid, and cost-efficient way to hold gold versus physical formats, making them an easy “add-on” allocation during uncertain macro phases.

 

 The persistence of strong flows also indicates that gold’s role is becoming more structural in Indian portfolios. With investors still mindful of inflation risks, currency volatility, and global geopolitical uncertainty, allocations to gold-linked products have remained steady, and January’s spike reinforces the category’s growing appeal as a portfolio stabiliser," said Nehal Meshram, Senior Analyst, Morningstar Investment Research India.