Mid-, smallcap rush lifts equity MF inflows to four-month high in August

Net inflows into equity mutual fund (MF) schemes scaled a four-month high of ₹29,329 crore in August as investors continued to ramp up investments in midcap and smallcap funds. The 19 per cent month-on-month (MoM) jump in net inflows last month was driven by a surge in gross lump-sum investments as systematic investment plan (SIP) inflows and redemptions saw only modest changes.

Gross SIP inflows went up 1 per cent MoM to a new all-time high of ₹32,297 crore, data released by the Association of Mutual Funds in India (Amfi) showed.

Apart from higher midcap and smallcap fund inflows, experts attributed the rise in net collections to a revival in new fund offering (NFO) activity.

"Though NFO mobilisations from several new launches added to the net sales numbers, midcap and smallcap schemes continue to add large part to the net sales numbers. This can be attributed to a robust SIP book in this category," said Manish Mehta, Chief Business Officer, SBI Mutual Fund.

Six active equity funds completed their NFO period in August, together collecting ₹3,051 crore. In July, three NFOs had garnered ₹768 crore.

Smallcap funds topped the net inflow chart for the second consecutive month as investors poured a record ₹7,973 crore into one of the best-performing MF categories. Midcap funds also garnered nearly ₹7,000 crore as the continued rally in the broader market raised investor interest.

"This coincided with relative strength in the broader markets during August, with mid- and small-cap indices outperforming the large-cap benchmarks. The persistence of strong flows into these categories suggests that investors continue to remain confident about the long-term growth potential of emerging businesses, notwithstanding elevated valuations in parts of the market," said Himanshu Srivastava, Principal, Manager Research, Morningstar Investment Research India.

Mid- and smallcap stocks have witnessed a sharp recovery since April 2026, while largecap stocks have lagged. In the five-month period ending August 2026, Nifty Midcap 150 and Nifty Smallcap 250 gained 29 per cent and 21 per cent, respectively. In the same period, the Nifty50 index was up 8 per cent.

The subdued Nifty50 performance has been reflected in investor interest in largecap funds. Investors have pulled out over ₹1,000 crore from active largecap funds in each of the last two months.

The August net inflow data was mixed for other broader categories. Debt funds witnessed 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 per cent MoM 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.

"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.

As an industry, our unwavering focus remains on deepening investor awareness, enhancing financial literacy, and empowering savers to achieve their financial goals," he said.