MFs in October: Equity mutual fund inflows drop 19% m-o-m to Rs 24,691 crore; total AUM nears Rs 80 lakh crore

Equity mutual fund inflows declined nearly 19% month-on-month to Rs 24,691 crore in October, from Rs 30,422 crore in September, even as benchmark indices Nifty 50 and BSE Sensex gained about 4%. The pullback signals a shift in investor sentiment, as many market participants likely booked profits amid the festive season and elevated valuations.

Despite the slowdown, most of the 11 equity fund categories continued to see net inflows, reflecting underlying investor confidence in equities. However, dividend yield funds and ELSS (equity-linked savings schemes) recorded net outflows of Rs 178 crore and Rs 665 crore, respectively, with the ELSS outflow nearly doubling from Rs 308 crore in September.

Flexicap funds remained the most preferred category, attracting Rs 8,928 crore in inflows—up 27% from the previous month. In contrast, large-cap funds saw a sharp fall in inflows to Rs 972 crore from Rs 2,319 crore in September, while mid-cap and small-cap funds posted inflows of Rs 3,807 crore and Rs 3,476 crore, down 25% and 20%, respectively.

According to Himanshu Srivastava, Associate Director – Manager Research at Morningstar India, the moderation was expected. “While it’s a decent net inflow in absolute terms, the moderation could be attributed to profit booking by investors given the sharp surge in equity markets along with the festive season,” he said, adding that the overall participation “continues to reflect sustained confidence in equities.”

Meanwhile, sectoral and thematic funds remained a popular bet, with inflows rising to Rs 1,366 crore from Rs 1,221 crore a month earlier. The month also saw 18 new fund launches (NFOs), which mobilized Rs 6,062 crore—a sharp jump from Rs 1,959 crore in September. Of this, four sectoral/thematic NFOs alone contributed Rs 2,489 crore, showing continued appetite for theme-based investing.

On the fixed-income side, fund flows rebounded sharply, marking a significant turnaround after two months of volatility. As per Nehal Meshram, Senior Analyst, Morningstar Investment Research India, “Debt-oriented funds witnessed a sharp recovery in October 2025, registering net inflows of ₹1.60 lakh crore, following heavy redemptions of ₹1.02 lakh crore in September. The turnaround was largely driven by robust inflows into liquid and overnight funds, as institutional investors redeployed surplus cash after quarter-end outflows.”

Liquid funds led the surge with ₹89,375 crore of inflows, reversing outflows of ₹66,042 crore in September, while overnight funds attracted ₹24,051 crore, reflecting short-term treasury deployments as liquidity eased. Money market funds also rebounded with ₹17,916 crore, indicating a strong return of institutional liquidity.

Flows in short-duration segments strengthened as investors redeployed funds across accrual-oriented categories, supported by comfortable liquidity and attractive yields. Ultra-short and low-duration funds led this recovery, while corporate bond funds continued steady momentum with ₹5,121 crore of inflows. In contrast, credit risk funds remained under pressure, highlighting investor caution toward lower-rated debt.

Among longer-duration funds, activity was muted but selective. Dynamic bond funds recorded modest outflows of ₹232 crore after two months of gains, while medium-to-long duration funds saw a small inflow of ₹17 crore. Gilt funds remained weak with outflows of ₹931 crore, amid persistent volatility in long-term yields and global rate uncertainty.

Meshram noted that October’s flows “signal a return of liquidity-driven institutional allocations rather than a structural shift in investor preference,” emphasizing that short-term and high-quality categories reflect confidence in the current rate environment and comfortable system liquidity.

Hybrid funds also maintained strong momentum, reporting a 51% rise in inflows to ₹14,156 crore. Meanwhile, passive investment categories, including ETFs and index funds, logged ₹16,668 crore—a 13% decline. Gold ETFs stood out with ₹7,743 crore, as investors sought safety amid global uncertainties.

Overall, October’s mutual fund trends reflect a market in rebalancing mode — investors booking profits in equities, while institutions redeploy liquidity in short-term debt amid stable macro conditions.