India’s mutual fund industry demonstrated notable resilience in February as investors continued allocating money into equity schemes despite a mild correction in domestic equity markets.

Equity mutual funds attracted net inflows of ₹25,978 crore during the month, marking the 60th consecutive month of positive inflows into the category.

This steady participation came even as broader equity markets softened. During February, the Sensex declined 1.2 percent while the Nifty fell 0.6 percent, reflecting global macro uncertainties and lingering geopolitical tensions that weighed on investor sentiment across markets.

Despite the market volatility, the inflows helped lift the mutual fund industry’s assets under management (AUM) to ₹82.03 lakh crore, representing a 1.3 percent increase from January levels. The industry also added 42.58 lakh net folios, indicating continued participation from retail investors and expanding penetration of financial market products among Indian households.

Venkat Chalasani, Chief Executive Officer of the Association of Mutual Funds in India, noted that the February numbers underscore the industry’s stability even during periods of market uncertainty.

He highlighted that investor sentiment remained supported by strong corporate earnings and sustained flows from both domestic and foreign institutional investors.

Flexi cap funds attract strongest equity inflows

Among equity-oriented categories, flexi-cap funds emerged as the largest recipient of inflows, attracting ₹6,925 crore during February. This marks the seventh consecutive month of positive inflows into the category.

Flexi-cap funds offer fund managers flexibility to dynamically allocate across large-, mid-, and small-cap stocks, which has made them attractive during periods of market uncertainty when sectoral leadership can shift quickly.

Mid-cap funds also saw continued investor interest, recording ₹4,003 crore of net inflows, while small-cap funds attracted ₹3,881 crore. The sustained appetite for these segments reflects investors’ willingness to pursue higher growth opportunities despite concerns around valuations in certain pockets of the market.

Sectoral and thematic funds also remained popular, receiving ₹2,987 crore of inflows, indicating that investors continue to allocate toward targeted investment themes.

Himanshu Srivastava, Principal Research Analyst at Morningstar Investment Research India, observed that the pattern of flows suggests a balanced investor approach that combines growth-oriented allocations with diversified investment strategies.

He noted that the persistence of inflows despite market volatility reflects increasing maturity among retail investors and strengthening of the domestic mutual fund ecosystem.

SIP contributions remain near record levels

Systematic Investment Plans (SIPs) continued to play a central role in supporting equity inflows. SIP contributions for February stood at ₹29,845 crore, marginally lower than the record ₹31,002 crore recorded in January.

According to Chalasani, the slight moderation was largely due to the shorter duration of February and the month ending on a non-banking Saturday, which delayed some transactions into March.

Despite the temporary dip in monthly contributions, SIP assets grew 1.7 percent month-on-month to ₹16.64 lakh crore, now accounting for about 20.3 percent of the total industry AUM.

However, the SIP stoppage ratio rose to 76 percent from 74 percent in January, suggesting that some investors may be reassessing allocations amid recent market volatility.

Feroze Azeez, Joint CEO at Anand Rathi Wealth, said the continued strength of SIP flows reflects the discipline retail investors are adopting in their investment journey.

He added that the sustained growth in SIP contributions over the past year indicates rising confidence in mutual funds as a long-term wealth creation vehicle.

New fund launches continue to gather investor interest

Fund houses remained active on the product development front during February. A total of eight equity New Fund Offers (NFOs) were launched, collectively mobilising ₹3,955 crore.

Sectoral and thematic funds dominated the new launches, accounting for six of the eight NFOs and raising ₹3,560 crore. Meanwhile, a large-cap fund raised ₹324 crore, and a mid-cap fund mobilised ₹71 crore.

The dominance of thematic and sectoral strategies reflects asset managers’ attempts to tap into investor interest in specific structural growth themes.

Specialized investment funds see rapid expansion

Another emerging segment within the industry is Specialised Investment Funds (SIFs), which recorded sharp growth during the month.

Assets in this category rose to ₹9,711 crore, representing a 47.9 percent month-on-month increase. The segment also saw record inflows of ₹3,127 crore, supported by the launch of three new strategies.

Two equity-based strategies raised ₹916 crore, while a hybrid strategy collected ₹436 crore.

The strong growth indicates rising investor willingness to explore newer investment structures beyond traditional mutual fund categories.

Passive funds show mixed trends

The passive investment segment presented a mixed picture. Overall AUM declined 1.1 percent month-on-month to ₹15.23 lakh crore, primarily due to mark-to-market losses amid market volatility.

However, inflows remained positive.

Gold exchange-traded funds (ETFs) attracted ₹5,555 crore of inflows, making them the largest contributor within passive funds. Yet the total AUM in gold ETFs declined slightly due to price movements.

The inflows were significantly lower than January’s record ₹24,039 crore, indicating a moderation after the previous month’s surge in allocations toward precious metals.

Meanwhile, silver ETFs saw a net outflow of ₹826.3 crore, marking the first monthly outflow since November 2023. In January, silver ETFs had recorded strong inflows of over ₹9,463 crore.

Index funds also remained in demand, attracting ₹3,233 crore, highlighting the growing acceptance of passive investment strategies among Indian investors.

Suranjana Borthakur of Mirae Asset Investment Managers noted that although flows into ETFs moderated compared to January, the absolute numbers remain robust as investors continue to track opportunities linked to precious metal rallies.