Amid heightened market volatility and global uncertainty sparked by US President Donald Trump's ongoing tariff war, the Indian mutual fund industry showed a mixed trend in March 2025, with equity mutual fund inflows declining for the third consecutive month even as Assets Under Management (AUM) touched a new record high.

According to the latest data released by the Association of Mutual Funds in India (AMFI), equity-oriented mutual fund net inflows stood at Rs 25,082 crore in March, a 14% drop from February’s Rs 29,303 crore. This continues a declining trend, with January having recorded Rs 39,688 crore and December Rs 41,156 crore in inflows. This downward movement indicates growing caution among retail investors amid an uncertain global economic environment.

Performance by Fund Category

Despite the overall decline in net inflows, certain fund categories continued to attract strong investor interest:

• Flexi Cap Funds led the equity pack with inflows of Rs 5,615 crore, up from Rs 5,104 crore in February. These funds, known for their flexibility to invest across market capitalizations, seem to appeal to investors in uncertain times.

• Small Cap Funds witnessed inflows of Rs 4,092 crore, a slight increase from Rs 3,722 crore in the previous month, showcasing continued retail investor appetite for long-term high-growth opportunities.

• Mid Cap Funds also maintained momentum with inflows of Rs 3,439 crore, just marginally higher than Rs 3,406 crore in February.

On the other hand, Large Cap Funds saw a dip in inflows at Rs 2,479 crore in March, down from Rs 2,866 crore in February, reflecting a cautious stance towards frontline stocks due to their higher sensitivity to macroeconomic events.

Sectoral and Thematic Funds See Sharp Decline

One of the most notable trends from the AMFI data is the drastic reduction in inflows into sectoral and thematic funds. These funds garnered only Rs 735 crore in March, compared to Rs 5,711 crore in February. This sharp 87% fall is indicative of a shift in investor sentiment away from concentrated sectoral bets towards more diversified strategies, possibly due to the high risk and volatility associated with theme-based investing during global economic stress.

Total Mutual Fund Industry AUM at Record High

Interestingly, despite the dip in net inflows, the total AUM of the mutual fund industry rose by 1.87% to a record Rs 65.74 lakh crore in March from Rs 64.53 lakh crore in February. This increase is largely attributed to mark-to-market gains in the equity markets and ongoing Systematic Investment Plan (SIP) contributions that provide consistent inflows.

Jatinder Pal Singh, CEO of ITI Mutual Fund, remarked that the steady flows in flexi cap, small cap, and multi-cap funds are a positive sign and suggest that investors are maintaining a long-term investment perspective despite macroeconomic and geopolitical headwinds.

He added, “Equity AUM grew by 7.5% to Rs 29.5 lakh crore, and while net flows declined, gross equity sales actually increased by Rs 2,100 crore, pointing to higher redemption activity rather than reduced buying.”

Other Key Highlights

• Gold ETFs, which had seen robust investments of Rs 1,980 crore in February, experienced an outflow of Rs 77 crore in March. This decline might reflect profit booking as gold prices touched recent highs or a rotation of funds back to equities amid improving domestic sentiment.

• Debt Mutual Funds continued to witness heavy outflows. In March, investors pulled out Rs 2.02 lakh crore, significantly higher than the Rs 6,525 crore outflow in February. The sustained outflow indicates investor concerns over interest rate volatility, especially with central banks globally re-evaluating their monetary tightening stances.

• Overall, the mutual fund industry recorded a net outflow of Rs 1.64 lakh crore in March 2025, compared to a net inflow of Rs 40,000 crore in February. This reversal can be largely attributed to redemptions from debt and sectoral funds.

What Does It Mean for Investors?

The drop in net inflows for the third straight month, even as total AUM hits a new high, paints a nuanced picture. It suggests that investor confidence remains intact in diversified long-term equity strategies, but there is a growing aversion to high-risk and cyclical bets, such as sectoral and thematic funds.

Additionally, retail participation through SIPs and multi-cap strategies remains healthy, signaling resilience in the Indian investment ecosystem. However, rising redemptions indicate profit-taking activity, possibly as investors rebalance portfolios or respond to international developments like the US tariff pause.

While tariff tensions and global macroeconomic cues may continue to create short-term volatility, the Indian market's domestic fundamentals remain robust, offering attractive long-term prospects for mutual fund investors.

Conclusion

The March 2025 AMFI data underscores the complex dynamics at play in the Indian mutual fund industry. Equity inflows may have slowed, but the growth in AUM, alongside the preference for diversified strategies, indicates that investors are adapting to the evolving global and domestic landscape. Flexi, small, and mid-cap funds continue to shine, while investors stay cautious on debt and sector-specific exposures.

With India’s inflation trajectory easing and interest rates stabilizing, this phase could present an opportunity for disciplined investors to rebalance and realign portfolios for long-term wealth creation.

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