In charts: How mutual fund investors responded to the March volatility

A mild form of that acid test roiled Indian markets, along with global ones, in March. The benchmark equity index, BSE Sensex, tumbled 11% that month alone.

At the same time, Indian investors did not panic amid the carnage and demonstrated an inclination to use the opportunity of lower valuations to invest more, the latest data on Indian mutual funds shows. In the process, they also burnished the credentials of Indian mutual funds not only as an investment vehicle, but also as a mover of Indian markets.

Bottom fishing

Data on monthly net inflows into Indian mutual funds over the past year shows that equity-oriented schemes remain the bedrock of mutual fund growth, adding about ₹3.5 trillion.

They have recorded positive inflows in each of these 12 months. March, despite market turbulence, saw the second-highest equity inflow of the year at ₹40,450 crore. The only higher month was July 2025 ( ₹42,702 crore), though nearly two-thirds of that came from new scheme launches. March 2026 saw less than 10% of inflows coming from new launches.

In contrast, debt-oriented schemes registered net outflows in seven of the 12 months. March alone saw net outflows of ₹2.9 trillion. However, this is partly due to the fact that corporations tend to invest more in debt funds than individual investors do.

The end of the financial year is the time when companies withdraw capital for advance tax payments and year-end balance sheet requirements.

Seeking ‘alpha’

The Association of Mutual Funds in India (Amfi), an industry grouping, gives a break-up of equity funds data under 11 categories of schemes. In March, nine of them showed positive net inflows. The exceptions were dividend yield funds and tax-saving funds. The latter is, anyway, seeing a drop in interest under the new tax regime, which has reduced the incentive for such investments.

Of the 11 categories of schemes, the three that received the maximum interest in March were flexi-cap funds, small-cap funds, and mid-cap funds. This was also in line with the trend for the past 12 months.

All three categories are higher on the risk-return curve than large-cap funds, mid-cap funds, and small-cap funds by virtue of investing in tier-II and tier-III companies, and flexi-cap funds by giving fund managers greater freedom on where to invest. What this shows is that investors continued to seek a mark-up in stock market returns, undeterred by price corrections.

Systematic investing

Some of these equity inflows could be coming from companies or high-net-worth individuals who are investing at lower levels. But a significant amount comes from retail investors, a fair measure of which is reflected in data on systematic investment plans (SIPs), which are basically automatic investments made on a pre-decided date every month. That construct makes SIPs a sticky, long-term investment habit.

The increase in SIP amount in March 2026 to ₹32,087—the highest monthly figure ever—came even as more SIPs were discontinued or saw their tenure completed than new registrations.

That’s a stoppage ratio of 101%--the highest in the past year. To be sure, new registrations also took a hit in March 2026, coming in at 5.28 million, the lowest since April 2025. However, despite the stoppage ratio hitting over 100%, the rise in monthly contribution suggests that SIPs are not just an investment product, but a core household savings habit. A larger fall in the market will provide a sterner test of this habit.

Shock absorbers

Even as domestic investors have been buying, foreign investors have been selling.

In March 2026, for example, net equity investments by mutual funds and domestic institutional investors (DIIs) amounted to ₹98,746 crore and ₹1.43 trillion, respectively. By comparison, foreign portfolio investors (FPIs) liquidated ₹1.17 trillion. Over the past year, FPIs have been net sellers in seven of the 12 months, while mutual funds and DIIs have been buyers in all months.

This progressively increasing interest in mutual funds is also leading to a structural transformation in Indian equity markets. Between them, FPIs and mutual funds have accounted for about half the assets held by custodians since 2020-21.

But their relative shares are changing and converging. While FPIs often cycle in and out based on global cues like the US interest rates, domestic institutions are providing a cushion that is suppressing volatility and holding the market despite global macro headwinds and rich valuations.

Gainers and losers

Given the market drop, overall industry assets under management (AUMs) registered only a marginal growth of 0.7% between Q3 and Q4 of 2025-26. But the interesting thing is how these gains are distributed across the 51 fund houses and what that says about investor preferences.

Two of the four largest fund houses, ICICI Prudential and Nippon India, added the most in AUMs in Q4, underscoring their pedigree. Conversely, there were 22 fund houses that saw AUMs decline, among them large ones like Aditya Birla, UTI, Axis, and SBI.

The other story lies in the rise of new-age fund houses.

Zerodha Mutual Fund and Jio BlackRock gained ground in Q4, signaling a structural shift toward passive investing and digital-first distribution. Similarly, boutique fund houses like Abakkus, with a specialized positioning, also recorded strong growth.

Overall, the data points to a market that is maturing: moving away from legacy brand loyalty toward a mix of low-cost passives and high-performance boutiques.

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