Equity MF Inflows Slip In February As Market Jitters Persist

Net inflows into equity mutual funds fell sharply in February, dropping 26% to ₹293.03 billion from ₹396.87 billion in January. This was the first significant decline in nearly a year, as investors redeemed holdings across categories, particularly in high-risk segments.

The sustained market correction over the past three months appears to have dented sentiment, though there are no signs of panic selling from retail investors. The Nifty  50’s steep 1.9% decline on Feb 28, 2025, the worst single-day fall in four months, may have triggered redemptions.

Mid- and small-cap funds saw net inflows shrink by 33-34% as investors pulled back amid sharp corrections in underlying stocks. Sectoral and thematic funds also witnessed similar outflows. Large-cap funds, however, remained relatively resilient, with only a marginal dip in inflows.

SIP contributions remained steady at ₹259.99 billion in February, down slightly from ₹264 billion in January. This steady stream of investments has provided a crucial buffer for the industry, preventing a deeper erosion in assets under management.

Equity AUM fell 8% to ₹27.40 trillion at the end of February from ₹29.90 trillion in October, reflecting both market corrections and redemptions. Over the same period, the Nifty 50 lost about 15%, while mid- and small-cap indices fell around 20%.

Despite persistent selling by foreign institutional investors, domestic investors continued to provide support, buying into dips. The market has recovered about 2% since February 28, but whether this signals renewed confidence or a temporary bounce remains to be seen.