Equity Inflows Hit 11-Month Low Despite Record SIPs India's mutual fund industry saw a sharp divergence in trends during March 2025, as overall Assets Under Management (AUM) surged by 23.11% year-on-year to Rs 65.67 lakh crore, yet equity inflows fell to an 11-month low of Rs 25,082 crore. The decline in equity inflows was attributed to a mix of profit booking, year-end redemptions, market volatility, and fewer New Fund Offers (NFOs).

AMFI’s latest report pointed to heightened investor caution, impacted by concerns over global trade tariffs, especially from the US, and a dip in risk appetite amidst economic uncertainty.

Small and Midcap Funds Remain Popular Despite the overall equity slowdown, smallcap and midcap mutual funds continued to see robust interest, with inflows of Rs 4,092 crore and Rs 3,439 crore respectively. These segments have consistently attracted retail investors looking for higher returns. Experts note that many investors prefer diversified categories like flexicap and multicap funds, which include largecap exposure without being fully concentrated in that space.

Meanwhile, largecap funds saw outflows of Rs 2,479 crore, even as their AUM rose due to market gains. This indicates a shift in investor preference away from largecap-centric strategies.

SIP Contributions at All-Time High, but Stoppage Rises One of the bright spots was the Systematic Investment Plan (SIP) segment. March SIP collections rose to an all-time high of Rs 25,925.63 crore, up 34.53% YoY. Total SIP AUM stood at Rs 13.35 lakh crore, contributing 20.3% of the total industry AUM.

However, the concern remains over the SIP stoppage ratio, which rose to 127.5%. This means for every 100 new SIPs registered, 127 were discontinued, largely due to cleanup of inactive accounts per Sebi regulations, and possibly also because of investor fatigue or portfolio rebalancing.

Thematic and Sectoral Funds Lose Momentum The thematic and sectoral funds category, once a darling for investors chasing trends, recorded a dramatic fall in inflows—only Rs 170 crore in March, compared to Rs 5,712 crore in February. This slowdown comes despite a YoY AUM growth from Rs 4.27 lakh crore to Rs 4.55 lakh crore.

The dip is attributed to increased market volatility, underperformance in certain thematic schemes, and weaker-than-expected GDP and earnings data.

Gold ETFs See Rare Outflows Another reversal of trend came from Gold ETFs, which recorded net outflows of Rs 77 crore in March, despite gold prices touching record highs. February 2025 had seen inflows of nearly Rs 1,980 crore in the same segment.

Experts believe this was largely a case of profit booking and portfolio rebalancing. Despite the outflows, the Gold ETF AUM rose to Rs 58,888 crore thanks to rising gold prices.

Passive Funds Continue to Grow Passive investing maintained its momentum, with March seeing Rs 14,149 crore in net inflows. The AUM in passive funds rose by 6.3% to Rs 11.46 lakh crore. Investors continue to prefer low-cost index funds and ETFs, given the market volatility and underperformance of some active fund categories.

Industry Experts React Akhil Chaturvedi, Executive Director & CBO, Motilal Oswal AMC, said that April would be a better barometer of investor sentiment, noting that March redemptions were largely due to profit booking and year-end planning.

Nehal Meshram of Morningstar India echoed similar views, citing global tariff tensions as a reason for investor caution. “We’re likely to see investors gradually increase equity exposure again once uncertainty fades,” she noted.

Conclusion In summary, March 2025 showcased a mixed picture for India’s mutual fund industry—record high AUM and SIP inflows, but declining equity participation due to a confluence of profit booking, global cues, and redemptions.

While passive, smallcap, and midcap categories remain in favour, sectoral and gold-linked investments witnessed pullbacks. Going forward, April’s performance may offer a clearer picture of investor sentiment amid evolving macroeconomic conditions.

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