In contrast, commodity exchange-traded funds (ETFs) and flexicap schemes have catapulted to the top of the popularity charts, buoyed up by strong performances.
The aggregate new account or folio additions in the three highest-risk equity scheme categories — midcap, smallcap and sectoral & thematic — have decelerated for three consecutive months. The reverse has happened in the case of ETFs and flexicap funds, the aggregate net account additions have grown in each of the past six months. In addition, they have added more accounts in seven of the last nine months compared to the three equity categories.
In the case of ETFs, the bulk of the account additions has happened in Gold and Silver ETFs.
According to experts, the change in investor preferences is largely due to the near-term performance bias, realisation of importance of asset allocation and commodity exposure. The correction and the volatility over the past one year have also driven investors to cut risks.
"Since flexicap funds dynamically allocate money into large, mid and smallcap stocks with a largecap bias, they become a preference for investors during times of excessive volatility in the market or in anticipation of near-term volatility. If we look at the one-year returns till September 2025, flexicap funds did relatively better than midcap, smallcap and most sector funds," said Sriram BKR, senior investment strategist, Geojit Investments.
According to Nilesh Naik, head of investment products, Share.Market, the decline in net account additions and inflows into small and midcap funds could also be due to profit-booking.
"The schemes witnessed significant inflows from retail investors over the past few years. These investors typically invest based on a fund’s past performance, and their behavioural biases play a significant role in their investment and redemption decisions. With the market seeing a recovery over the past couple of months, retail investors in such categories may be booking profits," he said.
The change in investor preferences is also visible in the net inflow data. Flexicap funds, the category which is on the cusp of becoming the largest equity-fund category with over ₹5 trillion in assets, garnered nearly ₹9,000 crore in October after three consecutive months of over ₹7,000 crore net inflows. The aggregate inflow into midcap, smallcap and sectoral funds, which was at ₹21,093 crore in July 2025, has been lower since then and stood at ₹8,649 crore in October.
Gold and Silver ETFs have also been garnering record inflows amid a “red-hot” rally in precious metals.
"The surge in Gold and Silver ETF flows was primarily due to the sharp rally in gold and silver prices from mid-August. This trend has been observed not just in India but across the global markets," Naik said.
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