SUMMARY
Equity mutual fund inflows dropped 26% in February, falling to ₹29,241.78 crore from ₹39,669.6 crore in January. Market volatility, global economic concerns, and profit booking contributed to the decline. The Association of Mutual Funds in India (AMFI) also attributed the decline to the lower number of days in February.
1 / 5Market volatility and index corrections | Small- and mid-cap funds saw the sharpest declines, with inflows dropping 35% and 34%, respectively. Karthick Jonagadla, Smallcase Manager and Founder & CEO of Quantace Research, noted that these segments faced sharp index corrections of 13.8% and 10.5%, leading investors to pull back.
2 / 5Profit booking at high valuations | After a sustained rally in equities, investors booked profits, reducing fresh allocations. Nehal Meshram, Senior Analyst – Manager Research at Morningstar Investment Research India, highlighted that “February marked the 48th consecutive month of net inflows into equity-oriented mutual funds. However, increased market uncertainty and equity corrections moderated investment flows.”
3 / 5Global and domestic economic concerns | Rising interest rates in developed markets, particularly the US, and the Federal Reserve’s hawkish stance triggered a risk-off sentiment. Escalating global trade tensions, geopolitical risks, and slower domestic earnings growth further weighed on investor confidence. Continued foreign institutional investor (FII) outflows added to the pressure.
4 / 5Category-wise impact | Sectoral and thematic funds saw the highest inflows at ₹5,711.6 crore, but ₹2,072 crore of this came from new fund launches. Flexi-cap funds recorded ₹5,104.22 crore in inflows, showing a preference for diversified strategies.
5 / 5Outlook for equity inflows | With RBI’s repo rate at 6.25% and CPI inflation at 4.31%, expectations of a rate cut could drive renewed interest in equities. The recent Nifty and Sensex correction of 5.6%-5.9% may present valuation opportunities for long-term investors.
