MF investors buy the dip as SIPs hit record high

Domestic mutual fund investors used the sharp market correction in September to step up their equity investments despite geopolitical uncertainty and rising interest rates. Equity mutual funds attracted net inflows of Rs 38,307 crore during the month, the second-highest in FY27 after April.

Systematic investment plans (SIPs) continued to drive inflows. Monthly SIP contributions touched a record Rs 32,490 crore, hitting a new high for the second consecutive month. The number of contributing SIP accounts also reached an all-time high of 100.6 million in September.

Navneet Munot, MD & CEO, HDFC AMC, said record SIP flows showed that investors increasingly understood the importance of staying invested during testing times. Volatile phases, he added, tend to give way to recovery for those who remain invested.

Saugata Chatterjee, president and deputy CEO, Nippon India Mutual Fund, described September as a phenomenal month for the industry. Strong equity inflows and SIP contributions reflected investor confidence in Indian markets, while rising folio numbers pointed to the growing financialisation of household savings and wider adoption of mutual funds, he said.

Mid– and small-cap funds led the buying spree, recording their highest-ever monthly inflows for the second consecutive month. Mid-cap schemes attracted Rs 7,835 crore, while small-cap funds garnered Rs 9,039 crore. These were 12% and 13% higher, respectively, than their previous records set in August.

The surge came despite sharp corrections in the broader market. The mid-cap index fell 6.81% during September, while the small-cap index declined 1.77%.

Diversified equity schemes also attracted strong investor interest. Flexi-cap and multi-cap funds recorded their highest inflows since April at Rs 6,702 crore and Rs 3,860 crore, respectively. Large- and mid-cap funds received more than Rs 4,200 crore, their highest monthly inflows since June.

A Balasubramanian, MD & CEO, Aditya Birla Sun Life AMC, said strong inflows into equity funds, particularly small-cap, mid-cap and flexi-cap schemes, indicated that investors continued to see opportunities in equities despite market uncertainties.

Large-cap funds returned to positive territory, attracting Rs 859 crore after two consecutive months of net outflows. This came even as the Sensex and Nifty 50 declined nearly 6% during September.

Chatterjee said the return of inflows into large-cap schemes was encouraging. Relatively attractive valuations, he added, provided a favourable outlook for the category.

Among other categories, hybrid schemes recorded their first net outflow since March. Redemptions were concentrated in arbitrage, equity savings and balanced advantage funds. Multi-asset allocation funds were the exception, attracting substantial net inflows of Rs 3,667 crore.

Passive equity schemes also saw robust inflows as investors sought to take advantage of lower valuations. Equity exchange-traded funds (ETFs) attracted Rs 9,960 crore, the highest among passive fund categories, while equity index funds received nearly Rs 2,650 crore.

Chatterjee said the strong flows into passive equity schemes reflected a growing preference for low-cost investment strategies as valuations became more attractive.

Gold ETFs recorded their highest monthly inflows since February at Rs 4,451 crore, while silver ETFs attracted Rs 1,974 crore.

Nehal Meshram, senior analyst, Morningstar Investment Research India, said investor sentiment towards gold was supported by sustained price strength and the metal’s strong performance in 2026. Central bank purchases and persistent investor demand also supported inflows.

However, debt mutual funds recorded net outflows of Rs 1.83 lakh crore in September, largely driven by quarter-end withdrawals from liquid and money market funds.

Meshram said the outflows reflected quarter-end treasury adjustments and institutional cash-management activity rather than a broad-based decline in investor appetite for fixed-income investments.

The industry’s net assets declined 5.1% to Rs 82.49 lakh crore from Rs 86.92 lakh crore in August. Debt fund redemptions and mark-to-market losses contributed to the decline.

Despite the fall in assets and heightened market volatility, the industry continued to attract new investors. It added 2.71 million folios in September, up 2.2% from 2.65 million additions in August, underscoring sustained retail participation even as markets remained under pressure.