Despite market volatility, equity mutual funds (MFs) have emerged as a popular wealth-creation tool among Indian investors. Equity mutual funds' net Asset Under Management (AUM) has increased by 335.31% in the last five years, reaching ₹33.32 lakh crore in July 2025 from ₹7.65 lakh crore in July 2020, according to ICRA Analytics data.
"SIPs have become a popular tool for managing volatility, allowing investors to invest a fixed amount on a regular basis while benefiting from rupee cost averaging, which means buying more units when prices are low and fewer when prices are high," ICRA Analytics stated in a note.
Key Highlights
- Equity mutual funds surged approximately 335% over five years, powered by small-cap funds as top performers.
- Top small-cap funds delivered standout five-year annualized returns—Quant led with ~40%, Nippon and Bank of India over 30%.
Inflows into equity mutual funds have steadily increased, from an outflow of Rs 3,845 crore in July 2020 to an inflow of Rs 42,673 crore by July 2025. Year on year, inflows increased by 15.08 percent from Rs 37,082 crore in July 2024, while month on month, they increased by nearly 81.06 percent from Rs 23,568 crore in June 2025.
"Inflows into equity mutual funds have increased dramatically in recent years as investors adopt a long-term perspective, recognizing that short-term market fluctuations are a necessary part of the wealth creation process. Historical data shows that markets eventually recover and reward patient investors," said Ashwini Kumar, Senior Vice President and Head Market Data at ICRA Analytics.
Sectoral/thematic funds received the most inflows at Rs 9,426.03 crore, as investors, particularly in the retail sector, continue to look for new growth opportunities and ways to generate alpha or higher returns. This was followed by flexi cap funds and small cap funds, which received inflows of Rs 7,654.33 crore and Rs 6,484.43 crore, respectively, as investors seek diversified allocations and higher returns," he added.
SIPs protect investors from market volatility
One of the primary drivers of this surge has been the growing popularity of Systematic Investment Plans (SIPs). SIPs allow investors to commit a fixed monthly amount while benefiting from rupee cost averaging, which means buying more units when prices are low and fewer when prices are high.
Inflows increase
According to ICRA Analytics data, inflows into equity mutual funds have significantly strengthened:
- In July 2020, the industry reported a net outflow of ₹3,845 crore.
- By July 2025, inflows totaled ₹42,673 crore.
- Inflows increased by 15.08% year on year, reaching ₹37,082 crore in July 2024.
- Inflows increased by nearly 81% from ₹23,568 crore in June 2025.
Also Read: SEBI Plans to Broaden Mutual Fund Categories
Where is the money flowing?
Sectoral/thematic funds received the highest inflows (₹9,426 crore) in July 2025. It was followed by:
- Flexible Cap Funds: ₹7,654 crore
- Small-Cap Funds: ₹6,484 crore.
