Investors pour over Rs 10,000 crore into flexi-cap funds in March. Opportunity or overcrowding concern?

Synopsis

Flexi-cap mutual funds attracted record inflows in March, reflecting strong investor demand for diversified and flexible equity strategies amid market volatility. Experts view the surge as a sign of growing confidence in the category, driven by its ability to dynamically allocate across market caps during uncertain times. While concerns about overcrowding remain, the trend largely indicates disciplined investing and a preference for flexibility rather than momentum chasing.

Flexi-cap mutual funds saw record inflows in March, highlighting strong investor appetite for diversified equity strategies amid volatile markets. According to the latest data from the Association of Mutual Funds in India (AMFI), the category attracted Rs 10,054 crore, surpassing its previous high of Rs 10,019 crore recorded in December 2025. The surge comes as investors navigate equity market uncertainty and seek flexibility in allocating across market capitalisations.

The key question now is whether this surge signals a compelling investment opportunity or points to increasingly crowded positioning in the category.

Opportunity or overcrowding?

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With rising inflows, concerns around crowding and future return potential often emerge. However, experts believe the current trend reflects investor preference for flexibility during times of global uncertainty, and the consistency means that investors are investing with a disciplined mindset and not chasing momentum.

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Arjun Guha Thakurta, Executive Director, Anand Rathi Wealth Limited, told ETMutualFunds that flexi-cap funds receiving record high inflows reflect strong investor confidence in the category and how it is becoming a strong investment option for investors.

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He further said that such a high level of inflows shows that during times of global uncertainty, investors prefer to invest in categories where fund managers have the liberty of flexible allocation strategies.

Another expert, Swati Jain, CEO Wealth, Arihant Capital Markets, shared with ETMutualFunds that investors have changed their minds and are now mostly putting their money into flexicaps after spending most of 2024 chasing sectoral and thematic funds like defense, PSU, and infrastructure.

The fact that investors have been holding on to about Rs 10,000 crore consistently across a category at the end of the financial year shows a structural shift towards a more mature mindset. Investors have clearly changed their preferences towards broader and diversified categories, Jain further said.

What’s driving the surge in inflows?

According to the data by AMFI, flexi cap funds have consistently seen the highest inflows for eight consecutive months (August 2025 to March 2026), receiving over Rs 56,000 crore during this period.

With these funds receiving record inflows, the question that comes is whether existing investors are better off staying invested or booking partial profits?

Jain said that March 2026 was a time when FPI was selling, the US-Iran war was going on, tariffs were unclear, and mid- and small-cap stocks were cheap and after the mid- and small-cap correction in late 2024 and the ongoing FPI selloff, investors don't want to tie their core savings to one theme or cap size anymore.

So flexi caps have a clear advantage because they don't limit themselves to one sector or cap size, and unless there is a big change in how sectoral funds do or a big change in how the market rates concentrated bets, this pattern should hold for most of FY2027, Jain added.

While citing that investors are seeking diversified exposure to all market capitalisation along with the benefit of flexibility in portfolio allocation as the main reason for inflows reaching all-time high in March, Thakurta said that existing investors would benefit more from staying invested so they can be part of the eventual recovery that will follow and investment decisions should be based on long term strategy and asset allocation, rather than based on short term volatility.

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, mid, and smallcap stocks.

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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 equity 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 their outlook on the market.

How are fund managers deploying fresh money?

With strong inflows coming in, the deployment strategy becomes crucial, especially in a volatile market environment.

Thakurta said that most flexi-cap funds maintain a tilt towards large caps, with approximately 37 out of 44 Flexi Cap funds currently holding over 50% of their portfolios in Large Cap stocks and the average exposure stands at 64% Large Cap, 19% Mid Cap, and 18% Small Cap.

He further said that the higher allocation to large caps provides stability to the portfolio, while the smaller exposure to mid and smallcaps captures the growth aspect. In fact, during this volatile period, fund managers have increased largecap exposure in their funds, which earlier stood at around 62% in November-December of 2025.

Jain also said that in a market that is unstable and driven by FPI selling, managers are putting new money into large-cap stocks that have strong balance sheets, low valuations, and clear earnings visibility in the earnings.

There is more buying seen in private banks, large-cap IT, and pharmaceuticals across the category in flexicap funds, she further said.

SIP or lumpsum: What should investors do?

In March, flexi-cap funds on average lost 10.66%. Out of 44 funds in the category, DSP Flexi Cap Fund lost the most of around 12.06%, followed by ICICI Prudential Flexicap Fund, which lost 11.99%.

JioBlackRock Flexi Cap Fund slipped 11.82% and Parag Parikh Flexi Cap Fund lost the lowest of around 6.83%.

Given current market conditions, Jain said flexi-cap funds invest in stocks of all sizes, which makes them more volatile so the best thing to do is to keep your SIP going for a long time and put more money into it during big market corrections.

Thankurta said that if investors have funds available to deploy, they can go ahead with lumpsum investment by staggering it across 6-8 weeks to better ride the volatility and those with regular income can do SIPs into diversified equity funds.

Also Read | Mutual fund cash levels drop 12% to Rs 1.86 lakh crore, hit 16-month low in March amid aggressive equity buying

He further said that the outlook for flexi cap funds is positive for long-term investors as the category has shown strong and consistent long term performance and has stood strong across different market cycles. However, investors should avoid relying entirely on any single category as it can lead to concentration risk, and should diversify across diversified equity mutual fund categories for balanced exposure.

(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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