With the Indian stock market experiencing a sharp correction, mutual fund (MF) inflows have shown signs of slowing down in February. Investors have turned cautious amid heightened volatility, leading to a shift in investment strategies. The broader market decline, coupled with concerns over valuations, has contributed to a decline in fresh inflows, particularly in mid and small-cap segments.
In a recent interview with CNBC, Nilesh Shah, Managing Director of Kotak Mutual Fund, stated that mutual fund (MF) flows have started to slow down in February, coinciding with the broader market downturn.
Shah highlighted that the average cash level in mutual funds was 5% in January, translating to approximately ₹1.75 lakh crore. While mutual funds had maintained strong inflows in the past months, the recent market correction appears to have weighed on investor sentiment.
Market Performance & Correction
The Indian stock market has witnessed significant declines, leading to concerns among investors:
Fall From Highs:
- Nifty 50: -15%
- Nifty Midcap 100: -21%
- Nifty Smallcap 100: -25%
Sector-Wise Declines:
- Nifty Metal: -20%
- Nifty IT: -19%
- Nifty Bank: -10%
- Nifty PSE: -30%
- Nifty Realty: -30%
Performance in 2025 So Far:
- Nifty 50: Down 6.5%
- Nifty Bank: Down 5.11%
- Nifty Midcap 100: Down 17%
- Nifty Realty: Down 24%
- Nifty Pharma: Down 15%
This correction has led to mutual fund flows slowing down, as investors become cautious in deploying fresh capital.
January 2025 AMFI Data: Mutual Fund Inflows
According to data from the Association of Mutual Funds in India (AMFI), equity mutual fund inflows declined slightly in January compared to December:
Equity Inflows Overview:
- Net Equity Inflows: ₹39,688 crore, down from ₹41,155 crore in December 2024.
- Systematic Investment Plan (SIP) Contributions: ₹26,400 crore, slightly down from ₹26,459 crore in December.
Category-Wise Mutual Fund Inflows (January 2025):
- Small-Cap Funds: ₹5,721 crore, up from ₹4,668 crore in December.
- Mid-Cap Funds: ₹5,148 crore, slightly up from ₹5,093 crore in December.
- Large-Cap Funds: ₹3,063 crore, up from ₹2,011 crore in December.
- Equity-Linked Savings Scheme (ELSS): ₹799 crore, up from ₹188 crore in December.
- Hybrid Funds: ₹8,768 crore, more than doubling from ₹4,370 crore in December.
- Gold ETFs: ₹3,751 crore, significantly higher than ₹640 crore in December.
Other Key Data:
- Total Mutual Fund Assets Under Management (AUM): ₹67.25 lakh crore.
- New Fund Offer (NFO) Inflows: ₹4,544 crore, down from ₹13,852 crore in December.
- Liquid Fund Inflows: ₹91,593 crore, reversing ₹66,532 crore outflows in December.
- Sectoral Fund Inflows: ₹9,016.6 crore, down from ₹15,331 crore.
- ETF Outflows: ₹1,172 crore, lower than ₹4,558.3 crore in December.
Around 30.7 lakh new folios were added in January, indicating that while inflows slowed, investor participation remains steady.
Investor Sentiment & Market Outlook
With the broader market correction, investors are reallocating capital towards:
- Large-cap funds and gold ETFs, considered safer investments during volatility.
- Systematic Investment Plans (SIPs), which remain resilient despite market fluctuations.
However, 5 lakh SIP accounts were closed in January, signaling increased caution among retail investors.
Shah emphasized that investors should focus on long-term investing, particularly in equity mutual funds, and not be deterred by short-term market movements.
Despite the market correction and slowing MF inflows in February, mutual funds continue to see steady participation, particularly in mid and small-cap segments. However, analysts caution against excessive exposure to high-risk categories.
Investors are advised to assess risk factors carefully and take a long-term approach while investing in mutual funds.
Disclaimer: The information provided is for informational purposes only and should not be considered financial or investment advice. Stock market investments are subject to market risks. Always conduct your own research or consult a financial advisor before making investment decisions. Author or Business Upturn is not liable for any losses arising from the use of this information.
