MFs' equity buying surges to 10-month high in August, shows strong inflows

Equity mutual fund (MF) investments surged in August to a 10-month high, indicating strong inflows into equity MF schemes post-July's record highs, despite a market correction

Investments in equity mutual funds (MFs) remained elevated in August after hitting a record high of ₹42,702 crore in July, going by the sharp increase in secondary market purchases by fund managers.

 

MFs ramped up their equity investments in August, with net purchases surging to ₹70,500 crore — the second-highest monthly tally on record. The only higher deployment was seen in October 2024, when equity buying touched ₹90,770 crore, the highest ever for a single month.

 

The quantum of net equity buying by MFs depends on several factors such as inflows and outflows from equity (including passive) and hybrid schemes, changes in equity allocation in hybrid schemes, and changes in cash holdings.

 

The elevated pace of equity MF investments in August comes amid market decline. The benchmark Nifty50 index, which slipped nearly 3 per cent in July, ended 1.4 per cent lower in August.

 

The surge in MF inflows in July came after a six-month period of subdued pace of investments. The pickup has been driven by revival in lumpsum inflows and new fund offering (NFO) collections. Gross lumpsum investments surged from ₹34,300 crore in June to over ₹52,000 crore in July. 

 

Lumpsum inflows in equity MFs come mainly from high net-worth and institutional investors, and are influenced by market corrections, valuation opportunities, and investment strategies.

 

NFOs are also a key driver of lumpsum investments. In July, MFs had raked in record NFO collection of ₹30,416 crore. However, a large portion of investments went into debt NFOs. In August too, the NFO pipeline was strong.

 

The faster pace of inflows into equity MFs has cushioned the impact of foreign portfolio investor (FPI) outflows. In August, FPIs had pulled out nearly ₹38,000 crore.

 

Despite the market correction in the initial months, MFs' equity market investments in calendar year 2025 (CY25) are set to surpass the record high levels seen in 2024. MFs have so far deployed ₹3.5 trillion in equities in 2025. The tally is equivalent to 81 per cent of the total investments of ₹4.3 trillion in 2024.

 

The MF investments have been largely supported by systematic investment plan (SIP) inflows, which remained resilient despite volatility.