Mutual Fund flows and takeaways for you
Mutual Funds (MFs) come in multiple categories, spanning equity, debt and hybrid structures. Tracking categories receiving more flows than others gives us a clue on what a majority of investors are preferring at a point in time. You have to gauge which category is suitable for your risk appetite and time horizon.
Two categories have been excluded from this analysis. One is Sectoral/Thematic Funds since the AMFI data for this category is a cumulation of multiple sub-categories from banking to infrastructure to pharma and is not comparable with other single-strategy categories. The other exclusion is liquid funds, as this is dominated by corporate investors parking treasury money. Our data source for this piece is the AMFI Monthly Note.
Flexi Cap leads flows
The category receiving the highest flows from December 2025 to June 2026 is Flexi Cap funds. Gross flows, before redemptions, have been ₹55,225 crore. Here, the fund manager faces no curbs in allocation to large-, mid- or small-cap stocks and is entirely at the manager’s discretion.
Given the flexibility, strategy varies from one AMC to another. That said, there is a general bias towards large caps in most such portfolios since they are relatively less volatile vis-a-vis mid- or small caps, cushioning the fund in times of market stress.
The inference is instructive. Though the equity market has been somewhat volatile, the fact that investors are continuing to build portfolios is a sign of their growing maturity. It also tells us investors are comfortable with the fund manager handling the market-cap allocation decision. That is the value proposition a Flexi Cap fund offers which investors seem to be recognising.
Multi-assets gain
The next most popular category in terms of flows over the last seven months is Multi-asset allocation funds or MAFs, under which gross flow was ₹45,453 crore. An MAF combines three or more asset classes, such as equity, debt, global equity, gold, silver, REITs and InvITs, in a single fund structure.
Rather than investors buying separate equity, debt and gold funds and then managing the allocation, a single MAF does the job. This imparts the benefit of asset allocation in one product and inculcates discipline. When the intended allocation ratio gets altered, for instance if equity rallies and weight in the portfolio rises beyond the target, the fund manager books profit in equity and rebalances towards the original ratio. If investors were to attempt this on their own, there would be a tax implication every time they switched funds. MAF Inflows picked up after equity turned volatile after September 2024. The rally in gold prices till February contributed to MAF’s positive sentiment.
Mid- and small-cap flows
The other two categories seeing buoyant flows over the last seven months are Mid-cap and Small-cap funds. Valuations of mid-cap and small-cap stocks are relatively stretched compared with large caps.
The risk level in the categories is relatively higher and investors must have a long investment horizon to ride out the volatility coming with it.
The one category consistently losing corpus is Equity Linked Savings Schemes (ELSS).
ELSS funds lose
The primary motivation for investing in ELSS was the tax benefit under Section 80C of the Income Tax Act, now Section 123 of the new Income Tax Act. Given the New Tax Regime is more beneficial for an overwhelming majority of the I-T payers, the Old Tax Regime and the relevance of Section 80C (now Section 123) deductions are steadily losing charm. As fewer taxpayers find it worthwhile to stay in the Old Tax Regime to claim this deduction, the flow of fresh money into ELSS funds has naturally tapered off.
The takeaway
Data across categories tells a fairly coherent story. Investors are staying invested despite volatility, increasingly getting comfortable delegating market-cap allocation decisions to fund managers via Flexi Cap funds and warming up to the idea of one-stop asset allocation via MAFs. At the same time, elevated flows into Mid- and Small-cap funds call for caution rather than imitation. As always, use this as a reference point for what the market at large is doing and then map it against goals, risk appetite and time horizon before deciding what is right for you. Popularity and suitability are not the same.
(Joydeep Sen is a corporate trainer (financial markets) and author.)