Inflows into equity MFs at 11-month low in March, Thematic flows plunge 97%

 Equity mutual funds witnessed a 14% month-on-month decline in net inflows, falling to Rs 25,082 crore in March 2025, according to data released by the Association of Mutual Funds in India (AMFI) on April 11. This decline comes on the heels of a 26% drop in February, bringing the overall decrease in equity inflows to nearly 37% over two months, driven by market correction, global uncertainty, and waning momentum in sectoral themes.

 

Key point to note: In March 2025, net inflows into Indian equity mutual funds declined to an 11-month low of approximately Rs 25,082 crore, marking the third consecutive monthly drop. 

 

 

This slowdown was largely driven by a sharp reduction in investments into sectoral and thematic funds, which had previously seen strong traction. 

 

"Notably, only four New Fund Offers (NFOs - (Samco Large Cap Fund, Helios Mid Cap Fund, Mahindra Manulife Value Fund and Motilal Oswal Active Momentum Fund)) were launched and concluded during the month, significantly lower than the preceding months, further contributing to the dip in overall inflows,"  Nehal Meshram, Senior Analyst – Manager Research, Morningstar Investment Research India.

 

Investor sentiment was further impacted by growing global trade uncertainties. Market volatility intensified following renewed tariff tensions, particularly as the US hinted at reintroducing trade barriers targeting key sectors like technology and manufacturing. These developments raised fears of a potential global trade conflict, prompting investors to adopt a more cautious stance, especially toward emerging markets like India.

 

While inflows into large cap funds dropped from Rs 2,866 crore in Feb 2025 to Rs 2,479 crore in March 2025, small cap funds continued to attract investors, with inflows rising from Rs 3,722 crore in Feb 2025 to Rs 4,092 crore in March 2025. Mid cap funds drew Rs 3,438 crore in March, while multi cap funds also saw a healthy increase in interest, with inflows rising from Rs 2,517 crore to Rs 2,752 crore.

 

However, the biggest shock came in the sectoral and thematic fund category, where inflows nosedived from Rs 5,711 crore in February to just Rs 170 crore in March — a sharp 97% plunge, underscoring investors’ growing caution toward theme-based and cyclical bets.

 

Despite the slowdown, some equity segments remained resilient. Dividend yield and ELSS (Equity Linked Savings Scheme) funds saw the highest inflows in March, reflecting investors’ search for stable income and tax-saving opportunities. With fiscal year-end approaching, ELSS funds gained popularity among retail investors seeking Section 80C tax deductions along with equity market exposure.

 

"The surge in dividend yield fund inflows suggests that investors are increasingly seeking consistent income and relatively lower-risk equity exposure, especially as broader market valuations remain elevated. Similarly, ELSS funds gained momentum as the financial year-end approached, prompting a surge in tax-saving investments under Section 80C of the Income Tax Act. The dual benefit of tax savings and equity market participation made ELSS funds a favored choice, especially for retail investors looking to optimize their tax outgo while staying invested in long-term growth assets," said Meshram.

 

Monthly inflows via Systematic Investment Plans (SIP) into mutual funds marginally declined to a four-month low of Rs 25,926 crore in March, despite equity markets staging a recovery. 

Redemptions decoded:

 

Even though more people invested in equity mutual funds in March (4% more than February), a lot of them also pulled their money out. In fact, redemptions (withdrawals) went up by 25% compared to the previous month.

 

What’s surprising is that:

 

Large Cap funds saw the biggest jump in redemptions — 54% higher than last month.

 

Sectoral and thematic funds also had a similar increase — 55% more redemptions.

 

Small Cap funds, on the other hand, actually saw fewer people selling — 15% less than the previous month.

 

Even Balanced Advantage Funds (BAFs), which are meant to perform well during market ups and downs, saw 30% more withdrawals.

 

"Investors redeemed higher amount this month, redemptions went up by 25% compared to previous month. What would take most market participants by surprise is that the redemptions went up most in Large Caps (54% higher than last month) besides sectoral and thematic (55% higher than last month). Small Caps saw a dip in redemptions (15% less than last month). Volatility could also not save Balanced Advantage funds, which also saw 30% increase in redemptions compared to last month despite the positioning of BAF funds as best during volatility. Yet, redemptions were less compared to all 7 months between Apr 2024 to Oct 2024," said  Akhil Chaturvedi, Executive Director & Chief Business Officer, Motilal Oswal AMC.

 

The likely reason for this is profit booking — investors wanted to lock in gains after the market performed well. April's data will be more telling about how investors are truly feeling, as per Chaturvedi.

 

These are some of the key highlights of March data:

 

• Mutual Fund Industry’s Net AUM stands at Rs 65,74,287.20 crore for the month of March 2025.
• Mutual Fund Folios are at 23,45,08,071 as of March 2025
• This was the 49th month of positive equity inflows, starting from March 2021.
• Growth/Equity Oriented schemes inflows for the month of March 2025 are Rs 25,082 crore
• Number of new SIPs registered in March 2025 stood at 40,18,564
• The SIP AUM is at Rs 13,35,188.07 crore for March 2025
• In March, a total of 30 schemes were launched raising a total of Rs 4,085 crore. Out of these, there were 11 index schemes which raised a total of Rs 2,049 crore. Besides, there was one gold ETF, 10 other ETFs and four equity-oriented funds.

   

"What’s encouraging is the continued inflow into small-cap funds assuming investors are keeping a long-term time horizon in mind and not getting swayed away by recent experience only. Sectoral categories have seen slower flows which is a good thing considering there was disproportionate flows into the category in previous months. 

 

Also, sustained SIP contributions above ₹25,000 crore, which reflects a maturing investor mindset focused on long-term goals. However, the sharp drop in hybrid fund flows is concerning—especially since hybrid products are well-suited to help investors navigate market fluctuations with a balanced risk approach. In times like these, maintaining discipline, staying invested, and relying on diversified solutions like hybrid products can truly help investors ride through volatility while staying aligned with their financial objectives," said Suranjana Borthakhur, Head of Distribution & Strategic Alliances, Mirae Asset Investment Managers (India).