Flexi-cap and gold ETFs shine as equity mutual fund flows see minor dip in December

The Indian mutual fund industry’s assets under management (AUM) eased slightly to about Rs 80.2 lakh crore in December 2025, down from Rs 80.8 lakh crore in November, reflecting the impact of volatile markets and foreign institutional investor (FII) outflows. Market benchmarks mirrored this cautious sentiment, with the Sensex and Nifty slipping 0.6% and 0.3%, respectively, while broader indices also fell—the BSE MidCap declined 0.5% and the BSE SmallCap dropped 1.01%.

Despite this overall dip, equity mutual funds, flexi-cap funds, and gold ETFs continued to attract strong investor interest, highlighting sustained confidence in long-term market opportunities. Equity mutual funds recorded net inflows of Rs 28,054 crore for the month, marking the 58th consecutive month of positive equity flows.

Here are some of the key highlights

Robust retail participation

Retail participation remained strong, with 26.4 lakh new folios added during December, taking the total number of folios in the industry to 26.12 crore. In December, 23 open-ended schemes mobilised a combined Rs 4,074 crore. Equity-oriented funds led both in launches and collections, raising Rs 3,568 crore, including the highest collection of Rs 2,468 crore by Abakkus Flexi Cap Fund. Hybrid schemes attracted Rs 302 crore, while the sole debt fund, Abakkus Liquid Fund, raised Rs 34 crore. Other schemes, including 15 index funds and ETFs, garnered Rs 170 crore.

Flexi-cap funds lead equity inflows

Flexi-cap funds emerged as the standout category, recording a 23.2% month-on-month rise in inflows to Rs 10,019 crore, making them the largest contributor to equity flows for December. Himanshu Srivastava, Principal Research at Morningstar Investment Research India, said, “The moderation in flows could be attributed to cooling momentum in mid-cap and small-cap segments, where inflows tapered after a strong run-up in valuations and periodic market corrections. Investors are adopting a more selective and disciplined approach, balancing return expectations with valuation comfort. Market volatility has also prompted profit-booking during opportunistic moments.”

Srivastava added, “The launch of the new Abakkus Flexi Cap Fund, which garnered net assets worth Rs 2,468 crore, boosted the overall inflow. The category continues to be the biggest beneficiary.”

Vaiibhavv Chugh, CEO of Abakkus Mutual Fund, noted, “Flexi-cap funds continue to be preferred as they allow inbuilt flexibility to maneuver across market caps. Large- and mid-cap funds are also relevant, given valuations in large caps are reaching comfortable levels. The industry-wide emphasis on asset allocation as a strategy to navigate volatility is clearly reflected in the growth of multi-asset allocation funds.”

Other equity categories see mixed trends

Inflows in mid-cap and small-cap funds declined month-on-month by 6.9% and 13.2%, respectively, but remained robust at Rs 4,176 crore and Rs 3,824 crore. Large-cap funds and large-and-mid-cap funds saw declines of 4.4% and 9.1%, with inflows of Rs 1,567 crore and Rs 4,094 crore. ELSS funds recorded net outflows of Rs 718 crore, while dividend yield funds saw net outflows of Rs 254 crore.

Suranjana Borthakur, Head of Distribution & Strategic Alliances at Mirae Asset Investment Managers (India), said, “With mid- and small-cap valuations appearing relatively expensive and market performance uneven, flexi-cap funds have emerged as a preferred option. These funds allow investors to adjust exposure across large, mid, and small-cap stocks, reducing the need for frequent allocation changes.”

Sectoral and thematic funds experienced the steepest decline, falling 49.3% month-on-month, though they still attracted Rs 946 crore. Borthakur explained, “The AMFI data shows a shift in investor preference toward broader, diversified categories. In 2024, elevated inflows into sectoral and thematic funds were driven largely by return chasing. Many investors have since recalibrated their approach, favoring balanced categories such as flexi-cap funds, which accounted for 23% of YTD net inflows in equity.”

Debt mutual funds faced heavy redemptions, with net outflows exceeding Rs 1.2 lakh crore, led by liquid, money market, and short-duration funds. This was largely due to advance tax payments and quarter-end treasury withdrawals, a recurring pattern each fiscal quarter.

Hybrid funds, however, recorded net inflows of approximately Rs 10,756 crore, supported by strong interest in multi-asset allocation funds, which attracted Rs 7,426 crore—the highest in six months. Borthakur noted, “Within hybrid categories, a significant portion of inflows is directed toward arbitrage funds for short-term surplus deployment. Multi-asset funds have seen 30% of YTD inflows in hybrid, reflecting growing demand for diversified portfolios encompassing equity, debt, and commodities.”

Gold and passive funds continue to draw interest

The passive fund segment maintained momentum, with AUM reaching a record Rs 14.57 lakh crore. ETFs and index funds together saw Rs 26,723 crore in net inflows, driven largely by gold and silver ETFs.

Borthakur said, “Gold has had an exceptional year, with net inflows into gold ETFs rising fourfold compared to last year. Gold is increasingly viewed not only as a hedge but as a strategic, long-term portfolio component.” In December, gold ETF inflows hit an all-time high of Rs 11,000 crore. Silver ETFs also drew strong interest, with inflows of Rs 3,962 crore, taking overall AUM to Rs 72,652 crore.

Srivastava noted, “Strong gold price momentum through 2025, coupled with heightened safe-haven demand, has supported sustained investor interest. Indian investors increasingly view gold ETFs as a regulated, liquid, and cost-efficient alternative to physical gold, particularly during equity and bond market volatility. Steady allocations to gold ETFs, even amid market swings, underline their role as a strategic hedge and diversification tool.”

SIP inflows reach record levels

Systematic Investment Plan (SIP) inflows reached an all-time high of Rs 31,002 crore in December. SIP assets stood at Rs 16.63 lakh crore, accounting for 20.7% of total AUM, while contributing accounts rose to 9.79 crore, up from 9.43 crore in November.

During December, 60.46 lakh new SIPs were registered, up from 57.13 lakh in November, while 51.57 lakh SIPs were discontinued or matured, compared with around 43 lakh in the previous month. This pushed the SIP stoppage ratio to 85%, up from 75.56% in November.

SIF segment continues growth

Strategic Investment Funds (SIFs) also gained traction, with AUM rising to Rs 4,892 crore from Rs 2,932 crore. The category saw inflows of Rs 1,933 crore, with hybrid strategies attracting Rs 1,571 crore, reflecting investor interest in structured, diversified investment approaches.

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