In February, the Mutual Fund investments in domestic equities have plummeted to ₹10,381 crore, marking their lowest in three years. This comes after a robust buying spree of ₹42,355 crore in January.
A major reason behind this is believed to be the rising geopolitical tensions and weak near-term returns, which have pushed investors away from equity mutual funds and towards safer alternatives like gold ETFs. Many Analysts believe that this cautious approach reflects concerns of investors when it comes to short-term market stability. This is despite the long-term growth prospects in India remaining intact.
Soft Inflows and Market Volatility Weigh on Equity Buying
The slowdown in equity buying came alongside lower overall inflows into equity mutual funds. Net inflows into equity funds in January fell to ₹24,029 crores, which is the lowest in seven months. The reason is concerns about weaker short-term returns and rising global tensions. This has in turn lead many investors to seek safer alternatives which includes gold ETFs.
Even systematic investment plans (SIPs) in active equity funds that were stable through most of 2025, saw a small decline during this period. Many analysts say this shows that even steady, long-term investors are becoming more cautious amid market volatility.
Fund Managers See Opportunities
However, despite the slowdown there are some fund managers who see the recent market correction as a chance to invest at lower prices. “We have increased cash levels to rebuild equity exposure at better levels,” said Quant Mutual Fund in its March outlook. They noted that India’s stock prices have realigned with historical averages. And future growth may be supported by improving earnings and ongoing structural reforms.
Looking Ahead
Views on the market remain mixed. Some of the analysts believe the recent volatility could be a buying opportunity for long-term investors. Whereas there are others who caution that geopolitical tensions and high energy prices may continue to weigh on sentiment. Meanwhile, rising equity allocations by hybrid funds may offer partial support to the market as valuations become more attractive.
Overall, while investors are more cautious now. Experts emphasise that India’s long-term growth story in equities remains intact, and periods of correction can present opportunities for disciplined investors.
