Equity MF inflows plunge 40% from peak as investor fatigue sets in amid market grind

Industry experts said the combination of steady SIPs, higher allocations to gold and multi-asset strategies, and selective positioning within equities suggests investors are recalibrating portfolios amid market consolidation, not retreating from equities altogether.

• Equity mutual fund inflows fell nearly 40% from last year's peak in July 2025
• Gold ETF inflows surged, nearly matching equity inflows in January 2026
• SIP contributions remained steady, showing continued retail investor engagement

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Equity mutual fund inflows fell nearly 40% from last year’s peak in July 2025, a pullback that market participants attribute to growing investor fatigue after months of range-bound markets and muted returns, rather than a loss of faith in equities.

Inflows declined to Rs 24,028 crore from a record Rs 42,702 crore in July 2025, as fewer equity fund launches compared to the peak, persistent volatility, and delayed return recovery prompted investors to turn cautious without exiting the asset class altogether.

Also read: January AMFI data shows equity flows moderate, SIPs hold steady, gold and silver ETFs surge

Vaiibhavv Chugh, CEO of Abakkus Mutual Fund, noted the moderation (in January) was expected given the environment investors have navigated over the past several months. “The flows in the equity MFs have dropped a bit as expected,” he said, attributing the slowdown to persistent volatility, particularly around tariff-related issues that took time to resolve.

Chugh added that despite the moderation, investor behaviour has remained resilient. “The investors and partners have shown tremendous resilience, which in itself is a great development,” he said, noting that valuation froth (especially in large caps) has gradually eased, improving comfort levels.

That resilience is also reflected in how flows have moderated rather than reversed, even as markets struggled to deliver meaningful returns over an extended period.

Aashish P Somaiyaa, CEO of WhiteOak Capital AMC, said such phases are a natural feature of market cycles. “Whenever you see reasonably long periods when markets are flatlining and not generating much return, that will cause some amount of impatience, and that has a reflexive effect on flows,” he said.

Experts note that part of the moderation in equity flows was driven by near-term uncertainty. “People were waiting for a few events like the budget and what kind of announcements would come in,” Anand Rathi Wealth’s Shweta Rajani said, adding that many of these uncertainties have now passed.

She also pointed to a sharp drop in equity new fund offers. “If you see the amount of NFOs that were coming versus what they have been in the last one or two months, they’ve hardly been offered,” she said.

Gold and diversification see higher allocations

Alongside the moderation in equity flows, investors have sharply increased allocations to gold. Gold ETF inflows rose to Rs 24,040 crore in January, from Rs 1,256 crore in July, bringing gold flows almost on par with equity for January 2026.

Sachin Jain, managing partner at Scripbox, cautioned against reading the surge as a structural shift. “At a company level, we maintain that a 5–10% allocation to precious metals is a good diversification tool and a hedge against inflation and geopolitical developments,” he said, adding that historically, investments at elevated levels such as these have often been followed by long phases of muted returns.

Somaiyaa said the growing interest in gold has coincided with a broader move towards diversification. “Multi-asset allocation is reflective of people wanting to have some diversification away from equity,” he said, adding that this does not necessarily indicate reduced conviction in equities.

SIPs steady as investors stay engaged with equities

Despite softer lump-sum inflows, systematic investment plan contributions have remained steady, rising from around Rs 28,000 crore in July-August to over Rs 31,000 crore in December and January, underscoring continued long-term retail participation.

“A SIP book of around Rs 31,000 crore is a reasonably strong engine supporting net inflows for an Rs 81 lakh crore mutual fund industry,” Jain said, adding that with limited attractive alternatives, the TINA effect (There Is No Alternative) a view that equities remain the most viable option for long-term returns when other asset classes offer limited upside, is likely to support equity allocations over time.

Equities still in favour

Rajani added that equity continues to remain central to client portfolios. “If you are targeting double-digit returns over a longer time period, then you need to have an equity-heavy portfolio,” Rajani said, noting that gold and silver are being used largely for diversification rather than as substitutes for equity.

Industry experts said the combination of steady SIPs, higher allocations to gold and multi-asset strategies, and selective positioning within equities suggests investors are recalibrating portfolios amid market consolidation, not retreating from equities altogether.

“The recent rise in gold and silver has led to a sharp increase in demand for gold & silver ETFs as investors look for different avenues to gain exposure to precious metals. However, equities continue to remain the preferred asset class for investment from a long-term wealth creation point of view,” A Balasubramanian, Managing Director & CEO, Aditya Birla Sun Life AMC added.

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