NEW DELHI: Equity mutual fund inflows in India experienced a significant year-on-year decline of 42% in July, falling to Rs 24,697 crore. This moderation reflects a growing selectivity among investors, influenced by concerns over market valuations and a period of subdued equity returns. However, the consistent strength of Systematic Investment Plan (SIP) contributions continues to provide a robust foundation for the segment.

According to data released by the industry body AMFI on Tuesday, despite the sharp decline, equity-oriented schemes have maintained a remarkable streak, recording their 65th consecutive month of positive inflows in July. This extended period of sustained investment underscores a fundamental belief in the long-term potential of equities, even as short-term investor behavior becomes more discerning.

Among equity categories, small cap funds led the inflows, attracting Rs 7,768 crore in July

The July inflow figure of Rs 24,697 crore was notably lower than the Rs 28,973 crore recorded in June and significantly less than the Rs 42,702 crore attracted in July of the previous year. This moderation in inflows occurred despite a slight increase in monthly SIP contributions, which rose marginally to Rs 31,961 crore in July from Rs 31,781 crore in June. This trend suggests a more cautious investment strategy, where capital continues to flow into equities, albeit at a slower pace and with a heightened focus on specific segments.

Ankur Punj, MD & Business Head, Equirus Wealth, commented on the trend, stating, “The moderation in equity mutual fund inflows reflects a degree of selectivity rather than a loss of investor confidence in equities. It also highlights ongoing portfolio rebalancing amid evolving valuations, with investors favouring segments that offer stronger long-term return potential while remaining mindful of associated risks.”

Akhil Chaturvedi, ED & Chief Business Officer, Motilal Oswal AMC, further attributed the cautious approach towards equity-oriented mutual funds partly to the lower returns observed over the past two years, prompting investors to re-evaluate their strategies.

Delving into specific equity categories, small cap funds emerged as the clear leaders in July, attracting Rs 7,768 crore in fresh inflows. They were followed by mid cap funds, which garnered Rs 6,192 crore, and flexicap funds, securing Rs 4,710 crore. Large cap funds, typically considered more stable, received a more modest Rs 1,322 crore during the month, indicating a tilt towards potentially higher-growth segments of the market.

On a broader industry level, July witnessed a significant turnaround, with the mutual fund sector recording a net inflow of just under Rs 2.4 lakh crore, a stark contrast to the net outflow of Rs 52,949 crore experienced in June. This reversal was primarily propelled by debt-oriented schemes, which attracted approximately Rs 1.9 lakh crore in July, effectively offsetting the Rs 1.1 lakh crore outflow from the previous month. Liquid funds were the largest beneficiaries within this segment, accumulating net inflows of Rs 1.2 lakh crore, followed by overnight funds with Rs 40,413 crore, and money market funds with Rs 21,180 crore.

Varun Gupta, CEO, Groww Mutual Fund, explained this phenomenon: “The sharp reversal in debt flows was led by strong inflows into liquid, overnight and money market funds, even as longer-duration categories remained under pressure. This suggests that investors continue to value liquidity and flexibility in their debt portfolios rather than making a broad-based shift towards taking duration risk.”

The industry’s overall assets under management (AUM) witnessed a healthy increase of 4.3% month-on-month, reaching just under Rs 85.8 lakh crore by the end of July. AMFI CEO Venkat Chalasani attributed this growth largely to higher market valuations and sustained purchasing activity by domestic institutions, reinforcing the resilience and evolving landscape of the Indian mutual fund industry. Agencies