Equity Fund Inflows Decline by 26% to ₹29,303 Crore in February Amid Market Selloff: AMFI Data
Equity Fund : Equity mutual fund inflows in India witnessed a sharp decline of 26% in February 2025, dropping to ₹29,303 crore compared to ₹39,687 crore in January. The latest data from the Association of Mutual Funds in India (AMFI) highlights the cautious approach taken by investors amid heightened market volatility.
Despite the decline, net inflows into open-ended equity mutual funds remained positive for the 48th consecutive month, signaling sustained investor interest in equities. However, the sharp correction in Indian stock markets, driven by global uncertainties, weak earnings, and sluggish economic growth, significantly impacted investor sentiment.
Stock Market Downturn Affects Equity Fund Inflows
The equity markets witnessed a notable decline in February, with the BSE Sensex falling by 5.55% and the Nifty 50 dropping 5.89%. The correction was fueled by multiple factors, including:
- Global Economic Uncertainty: Geopolitical tensions and inflation concerns dampened investor confidence.
- Weak Corporate Earnings: Several key sectors underperformed, causing a selloff in stocks.
- Slow Economic Growth: Domestic economic indicators pointed toward slower-than-expected recovery.
Category-Wise Breakdown of Equity Fund Inflows
The downturn in market sentiment was evident across different categories of equity mutual funds.
| Equity Fund Category | Inflows in February 2025 (₹ crore) | Change from January 2025 |
|---|---|---|
| Small-Cap Funds | ₹3,722.46 crore | -34.9% |
| Mid-Cap Funds | ₹3,406.95 crore | -33.8% |
| Large-Cap Funds | ₹2,866 crore | -6.4% |
| Focused Funds | ₹1,287.72 crore | +64.4% |
Small-cap and mid-cap funds saw the biggest drop in inflows, indicating a cautious approach by investors towards high-risk categories. Large-cap funds, considered relatively safer, experienced a moderate decline of 6.4%. Interestingly, focused funds—which invest in a limited number of stocks—witnessed a 64.4% surge in investments, highlighting selective buying opportunities by investors.
Debt Mutual Funds Face Net Outflows
The debt mutual fund segment, which had seen strong inflows of ₹1.28 lakh crore in January, recorded a net outflow of ₹6,525.56 crore in February. This shift suggests that investors may have booked profits or reallocated their funds due to interest rate concerns and market fluctuations.
Total Mutual Fund Industry AUM Declines
Due to mark-to-market losses in equity investments, the overall Assets Under Management (AUM) of the Indian mutual fund industry fell by 4.04%, from ₹67.25 lakh crore in January to ₹64.53 lakh crore in February. This decline underscores the broader impact of stock market volatility on mutual fund portfolios.
Key Takeaways for Investors
- The decline in equity fund inflows reflects investor caution amid market corrections.
- Small-cap and mid-cap funds saw steepest declines, suggesting risk-averse sentiment.
- Focused funds witnessed higher inflows, indicating selective opportunities in the market.
- The debt mutual fund segment saw outflows, possibly due to profit booking and rate concerns.
- Overall AUM fell 4.04%, highlighting the impact of mark-to-market losses on mutual fund investments.
Frequently Asked Questions (FAQs)
Q1: Why did equity fund inflows fall in February 2025?
A: The decline was due to market selloff triggered by global uncertainties, weak earnings, and economic slowdown, which led to cautious investor sentiment.
Q2: Which category of equity mutual funds saw the biggest drop in inflows?
A: Small-cap funds (-34.9%) and mid-cap funds (-33.8%) saw the largest decline, reflecting investors’ reduced appetite for high-risk investments.
Q3: Did all equity fund categories experience a decline?
A: No. Focused funds saw a 64.4% jump in inflows, indicating selective investment opportunities despite market corrections.
Q4: Why did debt mutual funds witness an outflow of ₹6,525 crore in February?
A: The outflows were likely due to profit booking, shifting investor sentiment, and interest rate concerns.
Q5: How did the mutual fund industry’s total AUM get affected?
A: The overall AUM declined by 4.04%, from ₹67.25 lakh crore in January to ₹64.53 lakh crore in February, due to losses in equity investments.
With market conditions remaining uncertain, investors are advised to focus on long-term investment strategies and diversify their portfolios to manage risks effectively.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.