Flexi Cap Fund Emerges As Preferred Investment Option In India's Equity MF Boom

Equity-oriented mutual funds witnessed strong growth in assets under management (AUM) during March 2026, with investors increasingly favouring flexible and growth-oriented strategies, an analysis by Abakkus Mutual Fund based on data released by AMFI said. The report highlighted that the average AUM of equity schemes rose sharply year-on-year in March, reflecting sustained participation from retail investors and continued confidence in equity markets despite periodic volatility.

The total average net AUM of equity-oriented mutual funds climbed to about Rs. 33.54 lakh crore in March 2026, marking a 17.4 per cent on-year jump. The surge signals a structural shift in investor behaviour, with more households allocating savings to market-linked instruments and adopting long-term wealth-creation strategies.

Within various categories, flexi cap funds stood out, with the average AUM surging to around Rs. 5.28 lakh crore in March, registering a robust 25.1 per cent growth from a year before. The category saw the largest influx within equity mutual funds, accounting for 15.8 per cent of total equity average AUM. The strong inflows into flexi cap funds underscore investor preference for dynamic allocation strategies at a time when market conditions have been volatile.

“The steady expansion in equity AAUM reflects the growing maturity of Indian investors, who are increasingly adopting a long-term investment approach despite market volatility. A key highlight in March 2026 has been the strong and sustained growth of Flexi Cap Funds, which continue to attract flows given their ability to dynamically allocate across market capitalisations and across sectors. These Funds offer agility, which is much needed in today’s dynamic market conditions. This flexibility has resonated well with investors navigating today’s evolving macro environment,” Vaibhav Chugh, chief executive officer at Abakkus Mutual Fund, said.

Broad-based growth was also visible across other equity categories. Mid-cap funds saw their average AUM rise to nearly Rs. 4.38 lakh crore, rising 22.7 per cent year-on-year, which highlights investor appetite for higher-growth opportunities. Small-cap funds also recorded healthy growth of 20.3 per cent, while large and mid-cap funds rose by 23.4 per cent. Sectoral and thematic funds remained among the largest categories with assets worth around Rs. 5.01 lakh crore, though their share moderated slightly, suggesting some cooling in concentrated bets.

In contrast, traditional and tax-saving categories showed relatively subdued growth. Equity-linked savings schemes (ELSS) recorded marginal growth of just around 2 per cent from a year ago, with their share in total equity assets falling to 6.9 per cent. Large-cap funds also witnessed slower growth compared to broader categories, indicating a gradual shift away from defensive allocations. Meanwhile, multi-cap funds and value or contra strategies registered moderate expansion, reflecting selective investor participation.

According to the report, the evolving trend points to increasing investor sophistication. Investors are becoming more comfortable with market volatility and are prioritising strategies that offer flexibility and potential alpha generation. Sustained inflows into mid- and small-cap funds further suggest a growing willingness to take calculated risks for higher long-term returns.

The data also indicates a broader structural transition in portfolio construction. Investors are gradually moving away from traditional large-cap-heavy allocations toward diversified and dynamic strategies such as flexi cap, mid-cap and selective thematic exposures. This shift reflects deeper equity market participation and a long-term outlook toward wealth creation.

Overall, the expansion in equity mutual fund assets during FY26 highlights strengthening investor confidence and the increasing role of mutual funds as a preferred investment avenue. With continued retail participation and a tilt toward flexible investment strategies, the equity mutual fund industry appears poised for sustained growth in the coming years, the mutual fund house noted.