New Delhi [India]: Mutual fund inflows are expected to remain volatile in the short term, according to a note by financial advisory firm InCred Equities. However, the firm predicts healthier inflows in the medium term, driven by increased retail participation, improved understanding of market volatility, and enhanced investment discipline.
InCred Equities highlighted that the inflow from regions beyond the Top 30 cities is also expected to rise, further stabilizing mutual fund investments.
“The recent correction in select AMC stocks has placed them in attractive buckets,” the note stated.
In February 2025, the Assets Under Management (AUM) in mutual funds dropped by 1% month-on-month to Rs 68 trillion, mainly due to softer equity fund inflows. While gross equity fund inflow and new SIP registrations were subdued, gross SIP inflow remained healthy at Rs 260 billion.
“We expect the volatility to stay in the near term, mainly led by global events. However, we remain optimistic in the long run amid rising market penetration,” the note added.
Investor sentiment showed some weakness, as gross inflow in equity schemes hit an 11-month low in February 2025. Despite this, low gross outflows suggested that investors are maintaining patience despite market turbulence.
Volatility has been notably high in recent months, particularly in small-cap and mid-cap indices, which have declined by 14-18% in 2025 so far.
Nonetheless, InCred Equities noted that SIP inflows showed resilience, registering only a 1.5% month-on-month decline while still holding strong at Rs 260 billion.
“We expect the volatility to continue in the near term, but we remain optimistic over the mid-to long-term horizon amid improving geographic penetration as well as the rising popularity of mutual fund schemes, mainly among young and mid-income investors,” the firm concluded.