Retail investors in India seem to have continued to trust their mutual funds and, in fact, have raised their investments in equity schemes even as the market remained volatile amid prevailing geopolitical tensions and US trade tariff-related uncertainties.
Equity mutual fund schemes saw inflows of Rs 42,702 crore in July, which is 81 per cent higher than the inflows of Rs 23,587 crore in June, according to the Association of Mutual Funds of India (AMFI).
Notably, the small and midcap schemes continue to garner a sizeable chunk of inflows. In July, midcap schemes saw inflows of Rs 5,182 crore, while smallcap schemes saw Rs 6,484 crore. Sectoral and thematic schemes saw inflows of Rs 9,426 crore during the month. Flexi cap schemes, large and midcap schemes, and largecap too saw good inflows in July. Tax saver ELSS was the only category to see outflows of Rs 368 crore.
The net assets under management of the mutual fund industry have now topped Rs 75.36 lakh crore as of July 31.
The continued inflows into equity funds are in sharp contrast to the continued selling by foreign institutional investors over July and August. Data from NSDL shows that foreign portfolio investors sold Rs 17,924 crore in Indian equity so far this month, up to August 8. This is on top of the Rs 17,741 crore they pulled out in July. So far in calendar 2025, FPIs have been net sellers to the tune of over Rs 1.13 lakh crore in Indian equity.
In comparison, data from Trendlyne shows domestic institutional investors buying close to Rs 61,000 crore worth in July and Rs 36,795 crore so far in August, in the equity cash market.
The FPI pullout comes amid the continued geopolitical tensions and trade tariff-related uncertainties.
“Market sentiments have been impacted by President Trump’s decision to impose a 50 per cent tariff on India. This came as a shock to the market and this has impacted market sentiments negatively,” pointed VK Vijayakumar, chief investment strategist at Geojit Investments.
The FII outflows have continued to pressure benchmark indices; the BSE Sensex is down around 3.7 per cent since July 1, although it ended 0.9 per cent or 746 points higher on Monday. Despite the market continuing to fall through July, domestic MF inflows have continued at a much stronger pace.
“This indicates that the investor seems to be following a policy of buying more on dips and continuing with the SIPs. It looks like now the investors are allocating to all categories of equity MFs, though bias is still more towards smallcaps,” noted Vikas Gupta, CEO and chief investment strategist at OmniScience Capital.
Several new equity fund launches during the month aided the inflows. At the same time, SIPs have remained strong. In July, inflows via SIPs touched Rs 28,464 crore, which is over 4 per cent higher than the Rs 27,269 crore in SIP flows in June and a record high.
“With the average AUM going past the Rs 75 lakh crore, we are on the right track towards achieving Rs 100 lakh crore goal as an industry. In a heightened period of uncertainty, this is a testament to the resilience and maturity of our markets and investors alike,” said A Balasubramanian, MD and CEO of Aditya Birla Sun Life AMC.
A study by Share.Market, fintech player PhonePe’s wealth management arm, noted that an analysis of over 6 lakh mutual fund investors between August 1, 2024, and July 31, 2025, revealed that about 48 per cent of the investor base is in the 18-30 years age bracket. About 95 per cent of young investors chose equity funds and nearly 92 per cent of the young investors invested through SIPs on the platform, it said.
Through 2025, interest rates too have been falling, with the Reserve Bank of India’s monetary policy committee slashing the benchmark repo rate by 100 basis points (1 per cent). This has also driven down interest rates on bank term deposits, which may have also played a part in some investors choosing equity investments instead, which can offer much higher returns, although at a significantly higher risk.
