India's MF Industry explodes 7X in 10 Years-What investors are buying now

Equity drew ₹133k Cr in inflows, Debt witnessed better inflows around ₹239k Cr in the quarter gone by

India’s mutual fund industry has ballooned to ₹74.4 lakh crore in assets under management (AUM) as of June 2025 — marking a sevenfold surge over the past 10 years, according to a new study by Motilal Oswal Mutual Fund. While active equity funds still dominate, the data reveals a structural shift toward passive investing, with low-cost index strategies now accounting for 17% of total AUM. 

 

Equity Still Dominates, But Debt Makes a Strong Comeback

Equity remains the largest chunk of the mutual fund universe, accounting for 59.94% of total AUM. Debt follows at 26.53%, while hybrid funds contribute 8.28%. Other categories round out the remaining 5.26%. But what’s really striking is the reversal of debt fund fortunes. 

The MF Industry recorded net inflows of approximately ₹398k Cr in the quarter.

 

 

In the June quarter, net inflows into debt mutual funds reached ₹2.39 lakh crore, reversing the previous quarter’s outflows. Much of this was driven by institutional participation in constant maturity strategies and corporate bond funds, likely influenced by changing interest rate dynamics. 

Overall, at ~64% of market share, Broad-Based accounted for the major share of equity net inflows, followed by Arbitrage at 31%.

 

Rise of Passive Investing: Now 17% of Total AUM

A clear takeaway from the report is the rising popularity of passive investing, which now makes up 17% of total mutual fund AUM. Though active funds still dominate in volume, the data signals a slow but steady shift in favour of low-cost, index-linked strategies.

 

In Q2 FY25, passive funds drew ₹36,000 crore in net inflows, while active strategies brought in ₹3.62 lakh crore. Within equity, passive broad-based funds outperformed with a 106% share of equity inflows, reflecting growing trust in blue-chip benchmark funds like large-cap ETFs.

 

“Passive funds are becoming a structural part of Indian portfolios. Their simplicity, cost efficiency, and market alignment are drawing serious investor interest,” said Pratik Oswal, Head – Passive Business, Motilal Oswal AMC. 

Review: The mutual fund industry saw overall net inflows of ₹398K Cr, led by ₹239K Cr in Debt inflows. Active Debt dominated with ₹233K Cr, while Passive Debt contributed ₹6K Cr.

 

Equity Inflows Led by Flexi Cap, Small Cap, and Mid Cap

Active broad-based funds also had a strong quarter, contributing ₹86,000 crore to total equity inflows:

 

Flexi Cap Funds led with ₹15,800 crore

 

Small Cap Funds followed with ₹12,000 crore

 

Mid Cap Funds added ₹10,800 crore

 

Among the Active Broad-Based segment, Flexi Cap and Small Cap funds led the inflows with ₹15.8k Cr and ₹12.3k Cr respectively, followed by Mid Cap funds at ₹10.8k Cr.

Thematic Funds Face Volatility

Thematic funds saw net outflows of ₹2,400 crore, compared to ₹8,400 crore in inflows the previous quarter. However, niche themes still garnered attention:

 

Defence theme funds attracted ₹1,800 crore

 

Technology and Business Cycle themes together drew ₹1,400 crore

 

The fluctuation signals that while thematic investing is popular, it remains highly sensitive to market cycles and macro triggers. 

All data in Thousands of Cr Jun Quarter

 

Hybrid Funds: Steady Demand for Risk-Balanced Strategies

Hybrid mutual funds maintained moderate momentum, led by multi-asset allocation funds, which accounted for 57% of net inflows in the category.

 

Balanced Advantage Funds pulled in ₹4,200 crore

 

Equity Savings Funds added ₹1,400 crore

 

The industry launched 46 New Fund Offers (NFOs) in the June quarter, raising ₹6,506 crore. However, a significant portion of these flows were concentrated in five AMCs, showing dominance by top fund houses in investor preference.

 

Key Takeaways for Investors:

Long-term structural growth continues in the mutual fund space, powered by both equity and debt.

 

Passive funds are no longer niche—they are becoming portfolio staples for cost-conscious investors.

 

Flexi-cap and small-cap funds remain strong for active investors seeking alpha.

 

Theme-based investing requires careful macro monitoring due to high volatility.

 

Hybrid funds offer balance for those with moderate risk appetite.