Equity mutual funds witnessed a decrease in inflows for the second consecutive month, dropping by 14.3% in January, while investments in gold ETFs doubled, according to recent data.
Decline in Equity Mutual Fund Inflows
Equity mutual funds experienced a notable dip in inflows in January, marking the second straight month of decline. This decrease suggests a shift in investor sentiment and allocation strategies. In December 2025, equity mutual fund inflows fell by 6.21% to ₹28,054.06 crore, from ₹29,911.05 crore in November.
Factors Contributing to the Shift
Several factors may have contributed to this decline:
- Market Volatility: Uncertainty in the equity markets often drives investors towards safer investment options.
- Profit Booking: With the surge in gold prices, some investors may have opted to book profits, moving funds from equity to gold.
- Attractive Equity Opportunities: Market corrections in the equity sector might have created buying opportunities, leading investors to reallocate their portfolios.
Gold ETFs as a Safe Haven
Amidst fluctuating market conditions, gold ETFs have emerged as a preferred investment choice. Inflows into gold ETFs soared by 211.2% in December, reaching ₹11,646.74 crore, a significant jump from ₹3,741.79 crore in November. This surge reflects a growing inclination among investors to hedge against market volatility and diversify their portfolios with safe-haven assets. Gold ETFs have reached record inflows previously in September, with ₹8,363.00 crore.
Overall Industry Trends
The broader mutual fund industry has seen varied trends. While equity inflows have decreased, other ETFs have recorded increased inflows. In December, other ETFs saw inflows of ₹13,199.44 crore, a 35.7% increase from November. However, debt mutual funds experienced significant outflows in December, with investors withdrawing ₹1,32,410.37 crore from debt-oriented schemes.
Category Performance
Within the equity segment, flexi-cap funds have consistently attracted substantial investor interest. In December, flexi-cap funds recorded net inflows of ₹10,019.27 crore, marking them as the highest contributors among equity fund categories. Conversely, large-cap funds witnessed a decrease in net inflows.
Expert Insights
Analysts suggest that the shift towards gold ETFs can be attributed to profit booking and the anticipation of potential interest rate cuts by global central banks. Despite the drop in inflows, gold remains a crucial portfolio diversifier, especially given the persistent global economic uncertainties.
Impact on AUM
The mutual fund industry's total assets under management (AUM) experienced a slight decrease, slipping to ₹80,23,378.99 crore in December. This is a 0.7% decrease from ₹80,80,369.52 crore in November. The industry witnessed net outflows of ₹66,590.70 crore in December.