Mutual Funds: Equity inflows hit ₹40,000 crore in March despite sharp drop in MF AUM

Mutual fund flows in March reflected a divergence between strong retail participation and pressure on overall assets, with equity inflows surging even as total AUM declined on a month-on-month basis, according to data from the Association of Mutual Funds in India (AMFI).

Net inflows into equity schemes rose sharply to ₹40,366 crore, marking a 55.5% jump from ₹25,965 crore in February. The increase was supported by steady SIP contributions, which climbed to ₹32,087 crore, up 7.5% from ₹29,845 crore in the previous month, indicating continued retail confidence despite volatile market conditions.

The rise in SIP inflows also partly reflects a timing adjustment. February saw a marginal dip due to fewer days and the month ending on a non-banking Saturday, delaying some auto-debits into March. AMFI estimates this spillover at around ₹1,000 crore.

Within equity segments, exchange-traded funds (ETFs) led the inflow momentum, attracting ₹19,802 crore compared with ₹4,487 crore in February, pointing to increased passive allocation. In contrast, gold ETFs saw inflows moderate to ₹2,266 crore from ₹5,255 crore, suggesting some cooling in safe-haven demand.

Sectoral and thematic funds recorded inflows of ₹2,699 crore, slightly lower than ₹2,987 crore in February, while dividend yield funds saw a modest uptick to ₹59.2 crore from ₹21.2 crore.

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On the fixed income side, flows turned sharply negative. Liquid funds witnessed outflows of ₹1.34 lakh crore, reversing inflows of ₹59,077 crore in February, likely due to quarter-end treasury adjustments. Corporate bond funds also saw outflows of ₹15,292.6 crore compared with inflows of ₹2,302 crore earlier, while credit risk funds reported outflows of ₹329.66 crore. ELSS funds continued to see redemptions, though at a slower pace, with outflows of ₹437.3 crore versus ₹650 crore in February.

Overall, the industry reported a net outflow of ₹2.39 lakh crore in March, with total assets under management declining to ₹73.73 lakh crore from ₹82.03 lakh crore in February.

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Commenting on the data, Nitin Agrawal, CEO, Mutual Funds at InCred Money, said the headline numbers need careful interpretation. “While the headline numbers for March 2026, a net outflow of ₹2,39,910 crore and AUM declining to ₹73.73 lakh crore from ₹82.03 lakh crore in February, may spook investors, both are misleading in isolation. The AUM decline is a mark-to-market story driven by a sharp equity market correction during the month, not a confidence story. The net outflow is almost entirely driven by debt fund redemptions, which is a well-established quarter-end phenomenon in March.”

He added that equity flows indicate underlying strength. “Equity net inflows at ₹40,450 crore signal conviction buying. While flows had moderated in the preceding months, March 2026 numbers provide the required confidence that positive fund flow activity can sustain even in periods of high uncertainty and volatility, a clear reflection of investor maturity.”

Agrawal noted that fund category trends also reflected evolving investor preferences. “Flexi Cap gains the spotlight as the top segment for inflows, reinforcing the importance of diversification across market caps when volatility is elevated. Mid Cap and Small Cap also witnessed sharp acceleration despite meaningful drawdowns, signalling that value buying opportunities are emerging in these segments. Moderation in Gold ETF flows points to a renewed optimism around equities.”

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Rohit Sarin, Co-Founder, Client Associates, said the data reflects reallocation rather than weakening sentiment. “March presents a nuanced picture of mutual fund flows, where headline outflows mask a deeper reallocation rather than a loss of conviction. The industry saw net outflows of about ₹2.4 lakh crore, largely driven by treasury movements in liquid and overnight funds typically episodic and balance sheet-led, not sentiment-driven.”

He added that risk capital flows remained intact. “Beneath this, risk capital remained resilient. Equity schemes recorded inflows exceeding ₹40,000 crore, led by mid-cap, small-cap, and flexi-cap categories. However, SIP activity moderated, with a seasonal dip in registrations and flows, suggesting retail inflows are normalising even as lump sum allocations stay strong.”

Sarin further noted shifts across categories. “Hybrid funds saw outflows, especially in arbitrage and equity savings, indicating recalibration of short-term capital, while multi-asset funds continued to attract flows. Debt fund outflows, particularly in liquid categories, reflect year-end institutional adjustments, not rate views.”