Large-Cap Funds See First Outflow in 3 Years: Investor Shift
By Market Desk
Large-cap mutual funds experienced their first net outflow in nearly three years in July, with investors moving capital to small and mid-cap schemes for higher growth potential.
Large-cap mutual funds experienced their first monthly net outflow in almost three years during July, with investors withdrawing ₹1,321 crore. This marks a significant shift as capital increasingly flows into riskier, higher-growth potential categories.
Investor Flow Dynamics
- Large-cap funds saw net outflows of ₹1,321 crore in July.
- Small-cap funds attracted substantial inflows of ₹7,767 crore during the month.
- Mid-cap funds received inflows totaling ₹6,192 crore.
Investor preference for small and mid-cap stocks over large-caps is also evident in fund flow data compared to the 12-month average. Large-cap funds recorded a 164% decline in net flows in July, indicating a strong pivot to outflows.
- Inflows into small-cap funds increased by 61%.
- Inflows into mid-cap funds rose by 27%.
Viraj Gandhi, chief executive officer at Samco Mutual Fund, stated that these outflows, alongside moderation in flexi-cap and a pullback from balanced advantage funds (BAF) and equity savings funds, suggest retail investors have largely priced in recent market concerns.
Investors are increasingly willing to pursue concentrated domestic risk for alpha generation over their long-term investment horizon, Gandhi added. Overall, monthly net inflows into equity mutual funds slowed by 15.7% to ₹24,685 crore in July.
Market Performance Context
- The Nifty Smallcap 250 index has risen by 29% since its 52-week low on 23 March.
- The Nifty Midcap 150 index has gained 21% since its 52-week low on 30 March.
- In contrast, the Nifty 50 index has risen only 10% since its 52-week low on 30 March.
Ankur Punj, managing director and business head at Equirus Wealth, noted that the moderation in equity mutual fund inflows reflects a degree of selectivity. While large-cap funds reversed into outflows, strong inflows into small-cap and other equity categories indicate a continued search for growth opportunities.
This trend highlights ongoing portfolio rebalancing amid evolving valuations, with investors favouring segments offering stronger long-term return potential while remaining mindful of associated risks. The monthly systematic investment plan (SIP) book increased to ₹31,960 crore in July, up from ₹31,780 crore in the previous month.