March equity mutual fund flows plummet to 11-month low amid market volatility
Mumbai: Net equity inflows into mutual funds dropped to an 11-month low in March, reflecting heightened market volatility and an ongoing correction.
Total net inflows into equity-oriented mutual funds stood at just over ₹25,000 crore during the month—the lowest since ₹18,917 crore seen in April 2024.
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Net inflows for open-ended equity-oriented schemes in March fell 14% month-on-month (MoM) to ₹25,082 crore while 5.1 million systematic investment plans (SIP) accounts were closed during the month as compared with 4 million SIP opened in March.
“The slowdown in equity inflows is a due to excessive global market volatility and the fact that everything is headlines-driven, with exaggerated moves occurring far too frequently,” said Akshay Chinchalkar, head of research at Axis Securities.
He added that increased volatility is leading investors to scale back on the amount they would invest normally or allocate more to cash.
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Aniruddha Sarkar, chief investment officer and portfolio manager at Quest Investment Advisors, said that one should not read much into the lower equity inflow numbers for March as the year-end tax adjustments typically distort the picture. Still, the broader volatility and subdued sentiment are hard to miss, he added.
Net inflows in smallcap funds increased 9.9% MoM to ₹4,092 crore in March and net inflows in midcap funds were slower at 0.9% MoM at ₹3,438 crore. Net inflows in largecap funds increased 1.4% MoM to ₹2,479 crore.
Outlook
Until there’s clarity on how the US tariffs will impact global growth, the market is expected to remain nervous. “The recent RBI rate cut and the shift in stance are steps in the right direction. Once the global situation normalises, markets will be the primary beneficiary of the upturn and we will see inflows coming back,” said Chinchalkar.
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Sarkar said that just one strong month of returns could bring investors back, as many are sitting on the sidelines, waiting for the right entry point. With the dollar index weakening and the rupee gaining ground, Sarkar believes FIIs will start eyeing India again—especially as China loses some of its sheen amid tariff tensions, potentially redirecting flows to India.
Large-caps are nearing long-term averages, while mid- and small-caps remain expensive. Experts said that with rising volatility and uncertain global cues, the response of post-Covid retail investors to any market decline remains to be seen. If geopolitical tensions ease, large-caps could see stronger inflows. For mid- and small-caps, some more correction may be needed before it becomes conducive for flows to pick up, they said.
On the debt mutual fund side, net outflows in open-ended debt-oriented schemes were at ₹2.02 trillion in March, a stark difference as compared to ₹6,535 crore in net outflows in February.
Dipti Sharma in Mumbai contributed to the story
