Inflows into Indian equity mutual funds slowed in October as investors grew more cautious toward riskier parts of the stock market, curbing exposure to funds that invest in smaller companies.
Equity funds attracted a net 330 billion rupees ($3.5 billion), down about 14% from 383.1 billion rupees in September, according to data from the Association of Mutual Funds in India.
Mutual funds pool money from individual investors and invest it across stocks and other assets. Their flows have become an important force in India’s equity market, providing a steady source of domestic buying that has helped offset persistent selling by foreign investors.
The slowdown came as a selloff pushed the NSE Nifty 50 Index to its lowest since April 2025 early in the month, while rising energy prices due to the war in the Middle East added to inflation concerns. Foreign investors were also pulling money from Indian shares in favor of markets offering greater exposure to AI.
The pullback was sharpest in smaller stocks. Small-cap funds attracted 64.1 billion rupees in October, down from a record 90.4 billion rupees in September, while mid-cap inflows fell to 48.9 billion rupees from 78.3 billion rupees.
Investors preferred funds with exposure to bigger companies, with large- and mid-cap funds drawing 84.8 billion rupees, the most among active equity categories.
“Large- and mid-cap category leads for the first time in the current cycle, signaling investors are moderating cap-curve risk while remaining fully invested in equities,” said Nitin Agrawal, chief executive officer of mutual funds at InCred Money. He said the moderation in small-cap flows was healthy and not alarming.
The move also reflected a widening gap in market performance. The Nifty 50 recovered from its early losses to end October almost 2% higher, helped by a return of foreign inflows as oil prices declined and global technology stocks sold off. The broader market remained under pressure, with the Nifty Midcap 100 falling 3.4% and the Nifty Smallcap 250 dropping 5.8%.
Debt funds, meanwhile, attracted 1.13 trillion rupees, reversing much of the 1.83 trillion rupees of outflows in September.
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