Equity mutual fund inflows ease for second consecutive month in Sep at Rs 30,421 cr

New Delhi: Equity mutual fund inflows stood at Rs 30,421 crore in September, extending the moderation trend for the second consecutive month, as investors turned cautious amid market volatility and global uncertainties.

This marks a 9 per cent drop from Rs 33,430 crore in August and well below July's all-time high of Rs 42,703 crore, data released by the Association of Mutual Funds in India (AMFI) showed on Friday.

Despite the slowdown, this marks the 55th consecutive month of net inflows into equity schemes, suggesting investors' continued faith in equities as a long-term wealth creation avenue.

Nehal Meshram, Senior Analyst – Manager Research at Morningstar Investment Research India, said the moderation "appears cyclical rather than structural," coming after two months of exceptionally strong inflows.

Ankur Punj, MD and Business Head of Equirus Wealth, attributed the softening to geopolitical uncertainties, while Viraj Gandhi, CEO of Samco Mutual Fund, pointed to a slowdown in thematic fund collections as the key factor behind the moderation in flows.

Meanwhile, Systematic Investment Plans (SIPs) continued to serve as a steady inflow channel for mutual funds. SIP contributions rose to Rs 29,361 crore in September, up from Rs 28,265 crore in August, indicating sustained retail investor participation despite near-term market swings.

"While the pace of inflows softened, the overall trend continues to reflect sustained investor confidence in equities," Meshram added, noting that steady SIP inflows show investors’ long-term commitment even in volatile conditions.

Within equity categories, Flexi-cap funds remained the top draw, attracting Rs 7,029 crore in September, its third consecutive month of robust inflows. Mid- and small-cap funds also saw healthy interest, garnering Rs 5,085 crore and Rs 4,363 crore, respectively, though both categories witnessed a slight slowdown as investors turned cautious after the recent rally in smaller stocks.

Large-cap funds recorded Rs 2,319 crore of inflows, reflecting a more balanced stance at elevated market valuations.

A striking trend emerged in precious metals, as investors sought diversification amid heightened global tensions. Gold ETFs saw a sharp surge in inflows, touching Rs 8,363 crore in September, up from Rs 2,190 crore in August, marking the highest monthly addition so far this fiscal year.

This fuelled total assets under management in Gold ETFs past the Rs 90,000 crore mark. Silver ETFs also drew significant investor attention, signaling a growing appetite for metals-based diversification.

The momentum extended to multi-asset allocation funds, which recorded nearly Rs 5,000 crore in inflows, largely driven by allocations to gold and silver, said Kartik Jain, MD and CEO, Shriram AMC.

"This momentum is largely driven by gold's sharp rally, fuelled by rising geopolitical tensions, sustained central bank purchases, and a weakening US dollar," said Hemen Bhatia, ED and CEO of Angel One Asset Management Company, emphasising gold's role as a strategic asset in diversified portfolios.

In contrast, the debt fund segment saw a massive withdrawal of Rs 1.02 lakh crore in September, a sharp reversal from outflows of just Rs 7,980 crore in August, as investors likely booked profits amid fluctuating interest rate expectations.

The decline was primarily led by large institutional withdrawals from liquid and money market funds, reflecting quarter-end liquidity adjustments and advance tax-related outflows. These categories, often used by corporates and institutions for short-term cash management, remain highly sensitive to seasonal liquidity cycles, Morningstar's Meshram said.

Overall, the mutual fund industry witnessed a net outflow of Rs 43,146 crore in September, following an infusion of Rs 52,443 crore in August.

The industry assets under management (AUM) inched up to Rs 75.61 lakh crore at the end of September, compared to Rs 75.12 lakh crore in August, reflecting resilience amid market churn.