Indian Mutual Funds: Losses Triple, SIPs Surge Amid Market Shocks

The Indian mutual fund industry experienced considerable volatility in FY 2025-26 (FY26), with the total number of schemes reporting negative annual returns nearly tripling from 243 to 731, according to the Securities and Exchange Board of India’s (Sebi) Annual Report. Despite this challenging environment, retail investors demonstrated remarkable resilience, significantly boosting Systematic Investment Plan (SIP) contributions and overall Assets Under Management (AUM).

Performance Downturn in FY26

Sebi’s data revealed a notable shift away from the typical expectation of double-digit returns. Schemes with losses exceeding 10 per cent increased substantially, indicating heightened market pressure during the fiscal year.

• Schemes with losses exceeding 10 per cent rose from 30 to 93.
• Those with returns between -5 per cent and -10 per cent grew from 41 to 146.
• The largest increase was in schemes with returns from 0 per cent to -5 per cent, expanding from 172 to 492.

Conversely, the number of high-yielding schemes declined across various performance brackets. Funds delivering strong positive returns became less common, reflecting the widespread market corrections.

• Schemes delivering over 10 per cent returns decreased from 304 to 198.
• Those generating more than 5 per cent returns fell from 1,156 to 737.
• However, schemes with positive returns between 0 per cent and 5 per cent did see an increase from 218 to 373.

Economic Factors Behind the Shift

Sebi attributed these changing performance trends to a combination of global and domestic economic pressures. Geopolitical disruptions, tariff tensions, and foreign capital outflows significantly impacted market dynamics.

Domestic equity market corrections, interest rate fluctuations, and broad secondary market declines also contributed to the downturn. Foreign portfolio investors (FPIs) recorded substantial net outflows from Indian equities, intensifying pressure on the mutual fund industry.

• The Nifty 50 declined by 5.1 per cent.
• The Nifty Realty index fell by 23.5 per cent.
• The Nifty IT index dropped by 21.2 per cent.
• FPIs recorded a record net outflow of Rs 1,52,692 crore from Indian equities.

Retail Investor Resilience Shines

Despite these significant market challenges, retail investors exhibited remarkable confidence and continued participation. The mutual fund industry’s unique investor base expanded, signaling enduring trust in collective investment vehicles.

Systematic Investment Plan (SIP) accounts and contributions surged, highlighting a consistent investment approach. These sustained inflows helped drive the overall Assets Under Management (AUM) to new highs by the end of the fiscal year.

• The unique investor base grew by 13.20 per cent to 61 million.
• Active SIP accounts reached 104.50 million.
• Monthly SIP contributions surged by 25.80 per cent to a record Rs 16,413 crore.
• Total Assets Under Management (AUM) reached Rs 73.7 lakh crore by March 2026.

The consistent growth in retail participation, particularly through SIPs, underscores a strategic long-term investment philosophy among Indian investors. This resilience suggests that individual investors continue to view mutual funds as a crucial avenue for wealth creation, even amidst short-term market turbulence and global economic headwinds.