Large-Cap Mutual Funds Gain Traction as Mid- and Small-Cap Inflows Slow Down in October

Data from the Association of Mutual Funds in India reveals that net equity inflows dropped 14 percent month-on-month in October. While enthusiasm for mid- and small-cap funds cooled due to valuation concerns and volatility, large-cap schemes saw notable increases in investor allocations.

Indian mutual fund investors are increasingly shifting their focus toward large-cap-oriented schemes. According to data released by the Association of Mutual Funds in India (AMFI), overall net equity inflows fell 14 per cent month-on-month to ₹32,994 crore in October, down from ₹38,307 crore in September.

Despite the broader slowdown, large-cap categories bucked the downward trend. Inflows into large-and-mid-cap funds nearly doubled, rising to ₹8,484 crore from ₹4,271 crore in the previous month. Meanwhile, large-cap funds attracted ₹1,032 crore, marking a 20 per cent increase from ₹859 crore in September.

In contrast, enthusiasm for higher-risk segments cooled significantly. Inflows into small-cap funds declined by 29 per cent to ₹6,407 crore, while mid-cap funds saw a 36 per cent drop to ₹4,980 crore.

Industry experts attribute the shift to valuation concerns and ongoing market volatility. Saugata Chatterjee, President and Deputy CEO of Nippon India Mutual Fund, noted that the continued improvement in large-cap inflows is encouraging, particularly as valuations have become relatively attractive. This trend suggests investors are actively working to balance their exposure across different market capitalisations.

Data shared by Suranjana Borthakhur, Head of Distribution & Strategic Alliances at Mirae Asset Investment Managers (India), indicated that small- and mid-cap funds accounted for about 34 per cent of total equity inflows in October. This represents the lowest share in seven months, compared to approximately 57 per cent in July.

Rather than exiting equities completely, the data points to portfolio rebalancing. Borthakhur highlighted that large-cap and large-and-mid-cap funds saw higher inflows as investors chose to spread their allocations across categories instead of concentrating their capital in a single segment.

Systematic Investment Plan (SIP) contributions remained resilient despite the volatile market conditions, standing at ₹32,160 crore in October compared to ₹32,490 crore in September. The number of contributing accounts eased marginally to 10 crore.

AMFI Chief Executive Venkat Chalasani stated that SIP inflows staying above ₹32,000 crore reflect the continued confidence of investors in equities, despite near-term market swings. Navneet Munot, MD and CEO of HDFC AMC, added that Indian investors have matured and now treat volatility as a standard part of their investment journey, proving that time in the market matters more than timing the market.

Overall, the mutual fund industry's Assets Under Management (AUM) increased marginally to ₹83.39 lakh crore in October, up from ₹82.64 lakh crore in September. Additionally, debt funds recorded a net inflow of ₹1.13 lakh crore, recovering from a net outflow of ₹1.83 lakh crore in the previous month.

"The recent shift toward large-cap and large-and-mid-cap funds indicates a mature rebalancing phase among Indian retail and institutional investors. As market valuations prompt caution in the small- and mid-cap segments, capital is naturally gravitating toward stability. The resilience in monthly SIP contributions above the ₹32,000 crore mark further demonstrates that long-term retail participation in the capital markets remains robust despite short-term volatility." — Dr. Shishir Gupta, Founder & CEO, StartupLanes