Flexi cap mutual funds record highest inflows for 7 consecutive months. Will the trend continue?

Synopsis

Flexi cap mutual funds are attracting significant investor money for seven months straight. This trend shows strong investor interest in the category. Experts advise against chasing performance and suggest focusing on long-term financial goals. Flexi cap funds offer flexibility for fund managers to navigate market conditions. Investors should continue SIPs for diversified equity exposure.

Flexi cap mutual funds have continued to attract strong investor interest, topping the inflow charts for the seventh consecutive month starting from August 2025 to February 2026, according to the data by Association of Mutual Funds in India (AMFI).

The pace of inflows has moderated recently. Inflows into flexi cap funds declined by around 10% in February after witnessing a sharper 23% drop in January. In February, the category received an inflow of Rs 6,924 crore compared to an inflow of Rs 7,672 crore in January. On the other hand, the inflows in December 2025 were recorded at Rs 10,019 crore, marking the highest monthly inflows ever for flexi cap funds.

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Experts say the strong inflows may not necessarily reflect long-term investor conviction. Instead, they could indicate performance-chasing behaviour as many investors entered the category after markets recovered from earlier corrections.

Rochan Pattnayak, CIO of Choice Mutual Fund told ETMutualFunds that inflows accelerated sharply from July 2025 onwards, precisely after markets recovered from the Feb–Mar'25 correction and investors poured in after the recovery, not during the drawdown period, which is the opposite of what confident, conviction-driven investing looks like

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The CIO further said that investors should avoid booking profits solely because inflows have been strong as decisions to exit should be based on portfolio allocation and financial goals rather than category-level flow trends.

“"High inflows happened, therefore I should sell" is itself a form of market timing, just in the opposite direction. The same investors who chased inflows in Oct–Dec '25 would be the same ones selling now and potentially missing the next leg up,” he said.

Abhishek Bhilwaria, BhilwariaMF, AMFI registered MFD shared with ETMutualFunds that this trend clearly reflects strong investor confidence in the category and the moderation in inflows in recent months may also be partly due to AMCs increasingly promoting multi-asset allocation funds, which has somewhat diverted investor attention.

That said, strong inflows alone should not be a reason for investors to book profits, as flexi cap funds are generally meant to be long-term core equity holdings and investors should consider profit booking only if their equity allocation has become excessive and requires portfolio rebalancing, Bhilwaria further said.

In the last seven months, flexi cap funds have received a total inflow of Rs 56,388 crore with the highest inflow received in December 2025.

Performance check

In the month of February, flexi cap funds gave an average return of 0.54% and gained and lowest upto 3%. Capitalmind Flexi Cap Fund delivered the highest return of 3.49%, followed by Navi Flexi Cap Fund which gave 3.43% return in February. The Wealth Company Flexi Cap Fund lost the most of 3.16%, followed by the UTI Flexi Cap Fund which lost 2.07%.

ETmutualFunds also checked the performance of these funds since August 2025, the month since these funds started receiving the highest inflows. From August 2025 till February 27, 2026, flexi cap funds gave an average return of 0.96%.

Motilal Oswal Flexi Cap Fund lost the most of around 7.76% starting from August 1, 2025 to February 27, 2026. This was followed by UTI Flexi Cap Fund which lost 6.82% in the same period.

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Navi Flexi Cap Fund and Aditya Birla SL Flexi Cap Fund gave 5.55% each from August 1, 2025 to February 27, 2026.

Do rising inflows affect performance or portfolio flexibility?

Another key question among investors is whether strong inflows could impact fund performance or reduce the flexibility that fund managers have in managing portfolios.

Experts point out that while very large inflows can sometimes create deployment challenges, flexi cap funds are generally better equipped to handle such situations compared with category-specific funds. Since they can invest across the market-cap spectrum, fund managers have a wider opportunity set and can allocate funds where valuations appear attractive.

Bhilwaria said that while rising inflows can occasionally pose deployment challenges, especially in the mid and small cap segments where liquidity can be limited, experienced fund managers typically manage this by gradually deploying capital or increasing allocation to more liquid opportunities.

Pattnayak said that when funds grow very large, they often end up allocating more to large-cap stocks simply because they are more liquid and this can gradually reduce the flexibility that flexi cap funds are designed to offer.

In the ongoing market volatility and geopolitical tensions, market experts are recommending investing in flexi cap funds as these funds allow fund managers to make investment decisions based on their discretion among the large cap, mid cap, and small cap stocks.

According to the Sebi mandate, flexi cap funds should have a minimum investment in equity and equity related instruments of around 65% of total assets and these are open ended dynamic equity schemes investing across large cap, mid cap, small cap stocks without the rigid allocation rules of other categories.

Flexi cap mutual funds offer the fund managers the freedom to invest across market capitalisations and sectors/themes. It means the fund managers can invest anywhere based on his outlook on the market.

In February, the gross inflows in the category were recorded at Rs 11,044 crore whereas the redemptions or repurchases stood at Rs 4,120 crore, according to the AMFI data.

So should one consider flexi cap funds for investments? Pattnayak said that continuing SIPs in flexi cap makes sense if an investor is invested in a large, well-managed fund whose manager has a demonstrated track record of managing large AUM without drifting into pure large cap territory.

Check the actual portfolio, if the fund's top 10 holdings are all Nifty 50 names and the small/mid allocation has dropped to under 20%, the investor is paying flexi cap expense ratios for large cap exposure, Pattnayak further said.

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Bhilwaria said that for investors considering fresh investments, flexi cap funds remain a solid option for diversified equity exposure, and SIPs continue to be the preferred mode of investing in the current environment as they help average costs and reduce timing risk and investors already running SIPs should ideally continue them rather than shifting categories based on short-term trends, though periodic portfolio reviews remain important for maintaining diversification.

According to the data on Value Research, flexi cap funds gave an average return of 14.44% in the last three years whereas in the last five years, these funds gave an average return of 11.42%

Outlook for flexi cap funds

Looking at the historical performance and recent inflow trend, Bhilwaria said that overall, the long-term outlook for flexi cap funds remains constructive, as their flexible mandate allows fund managers to adapt allocations across market caps depending on evolving market opportunities, making them well-suited as a core component of long-term equity portfolios.

Pattnayak said that the recent market correction could give fund managers opportunities to buy stocks at better valuations, particularly in mid- and small-cap segments. However, the growing size of the category could limit how effectively some funds take advantage of these opportunities.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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