Fund flow through MF will remain volatile in the near future- Report

Delhi Delhi: Fund flows through mutual funds (MFs) are expected to remain volatile in the near term, financial advisory firm Incred Equities said in a note. Flows will remain healthy in the medium term due to higher participation from the retail sector, greater understanding of market volatility and growing investment discipline, as well as greater flows from the top 30 cities.

“The recent correction in select AMC stocks has put them in the attractive bucket,” Incred Equities said. Assets under management in mutual funds declined 1 per cent month-on-month to Rs 68 trillion in February 2025, driven by moderation in equity fund flows among others.

Capital market volatility typically hurts flows, as seen in lower gross equity fund flows and new SIP registrations – though gross SIP flows were healthy at Rs 260 billion.

“We expect volatility to persist in the near term, driven primarily by global developments. However, we remain optimistic in the long term amid rising market penetration,” said the note from Incred Equities. Sentiment has softened somewhat as gross inflows into equity schemes fell to an 11-month low in February 2025, although gross outflows remained low, indicating that investors continue to remain patient amid the noise. Volatility has been high in recent months, especially as small-cap and mid-cap indices that had previously jumped 14-18 per cent have seen sharp corrections of 14-18 per cent so far in 2025. However, according to Incred Equities, another indicator of rising financial discipline is a marginal decline of 1.5 per cent month-on-month in systematic investment plan or SIP flows that managed to remain high at Rs 260 billion.