Mumbai: Inflows into equity mutual funds saw a sharp decline of 26% in February 2025, dropping to ₹29,303 crore, compared to ₹39,688 crore in January. The primary reason for this slowdown was a significant reduction in investments in small and midcap schemes, as investors remained cautious amid continued market volatility.

This marks the second consecutive month of declining inflows into equity funds, despite it being the 47th straight month of net positive investments in the segment, according to data released by the Association of Mutual Funds in India (AMFI) on Wednesday.

Key Highlights of February 2025 Mutual Fund Performance

Equity mutual fund inflows fell to ₹29,303 crore (down from ₹39,688 crore in January and ₹41,156 crore in December).
Systematic Investment Plan (SIP) contributions fell to ₹25,999 crore, the lowest in three months.
Small and midcap fund inflows dropped significantly:
Midcap funds: ₹3,406 crore (vs ₹5,147 crore in Jan)
Small-cap funds: ₹3,722 crore (vs ₹5,720 crore in Jan)
Debt mutual funds witnessed an outflow of ₹6,525 crore, reversing ₹1.28 lakh crore inflows in January.
Gold ETFs saw reduced inflows of ₹1,980 crore, compared to ₹3,751 crore in January.
Overall mutual fund inflows stood at ₹40,000 crore, a stark contrast to ₹1.87 lakh crore in January.

Why Are Inflows Declining? Expert Views

Market Volatility & Correction in Equities:

• The broader stock market witnessed a 5.5% decline in the Sensex in February, leading to a cautious approach among investors.
• Nehal Meshram, Senior Analyst at Morningstar Investment Research India, said:

"Short-term market headwinds have led to tempered investment flows. However, domestic investor confidence remains strong, as indicated by continued net inflows."

Impact of Shorter Month on SIPs:

• SIP inflows dropped to ₹25,999 crore, the lowest in three months.
• Suranjana Borthakur, Head of Distribution & Strategic Alliances at Mirae Asset Investment Managers (India), explained:

"The decline in SIPs is not significant. The shorter month of February contributed to lower SIP inflows compared to January."

Caution in Mid & Small-Cap Funds:

• Akhil Chaturvedi, Executive Director at Motilal Oswal AMC, noted that the continuous market correction in February led to slower inflows.
• Investors have adopted a wait-and-watch approach, postponing investments or opting for staggered allocations.

Where Did Investors Put Their Money?

Equity Mutual Fund Inflows by Category

Sectoral and thematic funds continued to attract the highest inflows, followed by Flexi Cap Funds, which allow diversification across market capitalizations.

Outflows in Debt Mutual Funds & Gold ETFs

Debt mutual funds saw outflows of ₹6,525 crore, reversing the strong ₹1.28 lakh crore inflows in January.
Gold ETFs recorded inflows of ₹1,980 crore, lower than ₹3,751 crore in January.

Key Debt Fund Outflows

These four categories accounted for 90% of the total debt fund redemptions, showing that investors preferred liquidity amid global uncertainty.

Overall Mutual Fund AUM Drops 4% in February

Total assets under management (AUM) declined to ₹64.53 lakh crore in February, down from ₹67.25 lakh crore in January.
The decline in AUM is attributed to:
Lower equity inflows
Debt fund outflows
Stock market correction (Sensex fell 5.5%)

What’s Next for Mutual Fund Investors?

Despite the dip in inflows, experts remain optimistic about the long-term growth of India’s mutual fund industry.

Markets could remain volatile in the short term, influencing equity inflows.
SIP contributions may stabilize, as investors continue long-term wealth creation.
Debt fund investors may shift towards liquid assets due to rate fluctuations.

Key Takeaway:

While short-term caution is visible, long-term investment sentiment remains intact. Investors are advised to stay diversified and focus on their financial goals.

Summary: February 2025 Mutual Fund Trends

Equity mutual fund inflows fell 26% to ₹29,303 crore.
SIP investments dropped to ₹25,999 crore (lowest in three months).
Mid & small-cap funds saw reduced inflows, while sectoral funds led investments.
Debt mutual funds recorded outflows of ₹6,525 crore, reversing January’s inflows.
Overall mutual fund AUM dropped 4% to ₹64.53 lakh crore.

Long-term investors should stay focused on their goals amid market fluctuations.

Mutual Fund Inflows – February 2025

Why did equity mutual fund inflows decline in February?

Due to market volatility, stock market correction (-5.5% Sensex), and lower mid & small-cap fund investments.

How did SIP inflows perform?

SIP investments dropped to ₹25,999 crore, mainly due to market uncertainty and February being a shorter month.

Why did debt mutual funds see outflows?

Many investors redeemed money from ultra-short & money market funds, leading to ₹6,525 crore in outflows.

What is the trend in Gold ETFs?

Gold ETFs saw an inflow of ₹1,980 crore, lower than January’s ₹3,751 crore, as investors looked for other safe-haven assets.

What should investors do amid market fluctuations?

Experts advise staying invested for the long term, maintaining portfolio diversification, and continuing SIPs.