Mutual fund investors put ₹29,329 crore into equity schemes in August, marking an 18.8% increase from July's ₹24,697 crore, according to the latest data from the Association of Mutual Funds in India (AMFI). The rise was led by strong demand for small-cap and mid-cap funds, while large-cap schemes recorded their second consecutive month of net outflows. As per AMFI data, the August inflow was ₹4,630 crore higher than the previous month, translating into an 18.8% month-on-month increase. The 19% month-on-month jump in net inflows was driven by a surge in gross lump-sum investments, with SIP inflows and redemptions seeing only modest changes. According to Himanshu Srivastava, Principal at Morningstar Investment Research India, the pick-up was encouraging, particularly because headline equity markets remained somewhat subdued during the month, indicating that domestic investors are increasingly willing to look beyond short-term market volatility.
Small-cap funds recorded their highest monthly inflow in two years at ₹7,973 crore in August, compared with ₹7,767.50 crore in July, representing a 2.7% increase that demonstrates continued strong investor interest despite slower growth than mid-cap funds. Mid-cap funds followed with ₹6,989 crore, rising from ₹6,192.31 crore a month earlier, marking a 13% increase and making them the largest month-on-month gainer in absolute value among major equity categories. Large and mid-cap funds attracted ₹3,873 crore, while flexi-cap funds received ₹5,059.42 crore, up 7.4% from ₹4,709 crore in July. According to Sandeep Bagla, CEO of TRUST Mutual Fund, the relatively weak large-cap flows were attributed to the lack of excitement around the large-cap index, which has significant exposure to sectors such as BFSI, IT and FMCG, with performance remaining lacklustre amid valuations and slower growth. Viraj Gandhi, CEO of Samco Mutual Fund, noted that small-cap schemes collected well above their 12-month average monthly inflow of ₹4,946 crore in August, while mid-cap schemes also recorded collections significantly above their 12-month average of ₹4,946 crore during August. As per Morningstar's analysis, the preference for these categories coincided with relative strength in broader markets, with mid- and small-cap indices outperforming large-cap benchmarks during August.
Despite strong recent inflows, historical data reveals that small-cap investors face significantly higher volatility compared to large-cap alternatives. According to FundsIndia analysis, small-cap drawdowns have historically been much more frequent and severe than those in the Sensex. The data shows that a decline of more than 10% from a previous peak occurred on 63% of observed days for the Nifty Smallcap 100, compared with 33% for the Sensex. For declines of more than 20%, the difference widens further with 45% of observed days for small-caps versus 11% for the Sensex. Most strikingly, when declines crossed 30%, the Nifty Smallcap 100 recorded it on 36% of observed days, compared with just 4% for the Sensex. FundsIndia notes that small caps are more volatile than large and mid-caps and have witnessed temporary declines of 15% to 30% almost every year, with only one of the last 22 calendar years having an intra-year decline of less than 10% for the Nifty Smallcap 100. However, historical data shows that despite intra-year declines of more than 15% occurring almost every year, three out of four years ended with positive returns, and markets ended the year positively 68% of the time, indicating that many declines were temporary and subsequently recovered.
The strong equity inflows were significantly boosted by a revival in new fund offering (NFO) activity, with six active equity funds completing their NFO period in August, together collecting ₹3,051 crore. This compares favorably to July when three NFOs had garnered ₹768 crore. The divergence between large-cap and other equity categories becomes clear when examining performance data over different time periods. Large-cap funds saw an outflow of ₹1,147 crore in August, narrower than the ₹1,322 crore outflow in July, representing a 13% reduction in outflow pace but marking the second consecutive month of net withdrawals. In contrast, mid-cap funds attracted ₹6,989 crore and small-cap funds saw inflows of ₹7,973 crore, with small-cap funds recording their highest monthly inflow in two years. The performance-chasing trend continued as mid- and small-cap stocks have witnessed a sharp recovery since April 2026, with the Nifty Midcap 150 and Nifty Smallcap 250 gaining 29% and 21% respectively in the five-month period ending August 2026, while the Nifty50 index was up only 8% during the same period. According to Morningstar's analysis, the continued flows indicate that investors remain confident about the long-term growth potential of emerging businesses despite elevated valuations in parts of the market, though they cautioned that investors need to remain mindful of the higher volatility inherent in mid- and small-cap segments.
SIP contributions rose to an all-time high of ₹32,297 crore in August, compared with ₹31,115 crore in July, representing a 3.8% month-on-month increase. The industry recorded 66.39 lakh new SIP registrations during August, while 53.82 lakh SIP accounts were discontinued during the month. SIP assets stood at ₹18,61,652 crore in August, up 2.8% during the month and accounting for around 21.4% of the industry's total AUM. The number of contributing SIP accounts crossed the 10-crore mark to reach 10,01,78,903. The August net inflow data showed mixed performance across broader categories, with debt funds witnessing an outflow of ₹8,127 crore, while hybrid funds and exchange-traded funds (ETFs) collected ₹10,000 crore each. The inflows and mark-to-market gains led to a 1.5% month-on-month rise in the industry's assets under management to ₹87 trillion. Venkat Chalasani, Chief Executive of AMFI, attributed the growth in the industry's assets and rising SIP inflows to growing investor confidence in MFs, noting that "investor confidence in mutual funds as a disciplined and long-term wealth creation vehicle continues to strengthen, as reflected in the crossing of a significant milestone of 100.2 million SIP accounts."
Gold ETFs witnessed a notable pick-up in investor interest in August 2026, garnering net inflows of approximately ₹2,597 crore, up around 67% from ₹1,559 crore in July. The acceleration in flows coincided with a strong recovery in gold prices during the month and indicates renewed investor preference for the asset class amid persistent macroeconomic and geopolitical uncertainties. Gold rallied sharply in August, supported by broad-based global ETF buying, a weaker US dollar, and shifting expectations around US monetary policy. On a cumulative basis, Gold ETFs attracted net inflows of approximately ₹41,475 crore during January-August CY2026. According to Morningstar's analysis, the stronger flows reflect gold's continued appeal as a portfolio diversifier and hedge against uncertainty, with geopolitical concerns and uncertainty around the US Federal Reserve's interest-rate trajectory adding to gold's safe-haven appeal. The trend suggests that investors are increasingly looking at gold beyond its traditional role as a store of value, with the availability of transparent, market-linked vehicles such as Gold ETFs making it easier to incorporate gold into diversified portfolios. Meanwhile, debt-oriented mutual fund categories recorded net outflows of ₹8,711 crore in August, compared with massive net inflows of ₹1.88 lakh crore in July, with the sharp reversal primarily driven by liquidity-oriented categories and reflecting tactical corporate and institutional treasury movements rather than broad-based deterioration in investor appetite for fixed income.
