Equity mutual fund inflows cool as investors shift to safer bets in FY26

FY26 was a weak year for the equity market in terms of performance, as the Nifty 50 fell 5.1 per cent and Sensex declined 7.1 per cent.

The moderation in equity flows, however, was offset by strong inflows into hybrid funds and gold ETFs, which have risen by around ₹1 trillion this year. The two fund categories, which had together raked in ₹1.3 trillion in FY25, have garnered ₹2.38 trillion as of February in FY26. The data for March is due in the second week of April.

"Amid heightened volatility, global uncertainties and recent market corrections, investor preference has clearly shifted towards capital protection. This is reflected in stronger flows into asset allocation funds and gold- and silver-linked products, even as pure equity inflows have moderated. Within equities too, flows have moved towards relatively safer categories like flexicap and largecap funds," said Akhil Chaturvedi, executive director and chief business officer at Motilal Oswal Asset Management.

Flexicap schemes emerged as the top category as investors poured nearly ₹80,000 crore into these schemes. Midcap and smallcap funds, which were the most popular categories in most periods of the previous two years, were the other two most popular equity schemes, even as net inflows moderated to some extent.

Himanshu Srivastava, associate director and manager, research, at Morningstar Investment Research India, also attributed the shift in investor preferences to the equity market volatility.

"Relatively muted returns and elevated uncertainty may have prompted investors to moderate fresh allocations towards equities, while some may also have chosen to book profits periodically," he said.

"In contrast, hybrid and commodity-oriented strategies appear to have benefited from this environment in FY2026. Hybrid funds have attracted investor interest because of their ability to balance risk and return through allocation across asset classes," he added.

Multi-asset funds, which were a niche MF offering until 2022, continued to gain popularity in FY26. The scheme category, which has the flexibility to invest across equity, debt and commodities, garnered ₹60,000 crore net inflows in the first 11 months of the year, on the back of strong performance.