Topic 6: MUTUAL FUNDS: FESTIVE FLOWS

October 2025 was a dynamic month for the Indian mutual fund industry, marked by strong equity inflows, steady growth in hybrid schemes, and cautious sentiment toward debt funds. Despite global uncertainties and volatile market cues, investors displayed sustained confidence in domestic equities, driven by robust corporate earnings and resilient market performance. The overall industry maintained a healthy growth trajectory, underscoring the deepening penetration of mutual funds across investor categories and geographies.
Equity mutual funds were the standout performers in October, attracting net inflows of around ₹14,610 crore. This surge reflected rising investor optimism as the Nifty index advanced by 4.51% during the month, supported by solid quarterly results and strong institutional buying. Sectoral and thematic funds saw particularly impressive traction, led by themes such as technology, electric vehicles, and artificial intelligence. Large-cap funds, meanwhile, provided stable long-term performance, with top performers such as Nippon India Large Cap Fund posting 8.4% annual and over 26% five-year returns, highlighting their consistency and defensive strength. The overall trend in equity fund flows indicated sustained retail participation, buoyed by rising SIP (Systematic Investment Plan) contributions and growing investor trust in long-term wealth creation through equities. Debt mutual funds, on the other hand, experienced net outflows of approximately ₹20,987 crore in October.
Investors adopted a cautious stance toward fixed-income assets amid flat bond yields around 6.5% and lingering concerns about potential interest rate volatility. The lack of meaningful movement in yields, combined with quarter-end portfolio adjustments, led to redemptions across several short-duration and liquid fund categories. Although fixed-income AUM expanded over the year due to base effects, the near-term sentiment remained subdued as investors preferred equity and hybrid exposure in anticipation of better returns.
Hybrid funds emerged as a key beneficiary of market uncertainty, registering healthy inflows of around ₹20,987 crore. Investors continued to favour aggressive and balanced hybrid schemes, which offered diversification benefits by combining equity upside potential with the relative stability of debt. The growing popularity of these funds reflected a preference for moderated risk amid volatile equity conditions.
At the industry level, assets under management (AUM) reached a record ₹75.61 lakh crore by September 2025, up 12.7% year-on-year. Monthly SIP inflows touched ₹29,361 crore, marking a 20% rise from the previous year and signalling deepening investor participation. Equity funds accounted for about 61% of total AUM, while passive funds—including index funds and ETFs—expanded their share to 17%, driven by cost efficiency and rising investor awareness. Notably, smaller asset management companies outside the top 15 continued to gain market share, suggesting a more competitive and inclusive fund landscape.
In summary, October 2025 underscored the resilience and maturity of India’s mutual fund industry. Equity and hybrid funds thrived on strong market momentum, SIP growth, and investor optimism, while debt funds faced redemptions amid stagnant yields. The overall picture reflected a sector in transition—balancing growth with prudence—as investors diversified across active, passive, and hybrid strategies to navigate evolving market conditions.



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