The mutual fund industry’s assets under management (AUM) declined 5.1% month on month to ₹82.64 lakh crore in September from ₹87.08 lakh crore in August, even as equity schemes attracted higher inflows and the number of investor folios continued to rise, according to ICRA Analytics.
The ₹4.44 lakh crore decline in AUM raises a question: Did investors pull money out of mutual funds, or did market movements play a larger role?
September’s data point to a combination of net outflows, concentrated withdrawals from short-term debt funds and the impact of valuation changes.
According to ICRA Analytics’ analysis of AMFI data, the industry recorded net outflows of ₹1.33 lakh crore in September. This was substantially lower than the decline in AUM, leaving a difference of around ₹3.10 lakh crore attributable to valuation changes and other residual effects.
This distinction matters because a fall in AUM does not necessarily mean investors have withdrawn an equivalent amount of money from mutual funds.
Why did AUM fall when equity inflows increased?
Equity-oriented schemes attracted net inflows of ₹38,294 crore in September, up 30.6% from ₹29,314 crore in August. Despite the stronger inflows, equity AUM fell by ₹1.67 lakh crore to ₹37.58 lakh crore.
The divergence indicates that adverse market movements more than offset the fresh investments entering equity schemes. The available figures, however, do not separately quantify the precise contribution of market movements to the decline in equity AUM.
Investor participation remained firm during the month. Equity folios increased by 17.69 lakh to 19.12 crore, while total mutual fund folios rose by 27.13 lakh to 28.62 crore.
The increase in folios, alongside stronger equity inflows, suggests that the fall in headline AUM was not accompanied by a broad-based decline in investor participation.
What drove the industry’s net outflows?
A sharper increase in redemptions was a key factor behind the deterioration in industry net flows.
Gross mobilisation rose 8.2% month on month to ₹15.25 lakh crore in September. Redemptions and repurchases increased faster, climbing 21.2% to ₹16.59 lakh crore.
Consequently, the industry moved from net inflows of ₹41,354 crore in August to net outflows of ₹1.33 lakh crore in September.
Income and debt-oriented schemes accounted for net outflows of ₹1.83 lakh crore, compared with ₹9,225 crore in August. Their outflows exceeded the industry’s overall net outflow because other categories, including equity schemes and ETFs, continued to attract money.
Within debt funds, withdrawals were concentrated in products commonly used for short-term cash management.
| Debt fund category | September net flows |
|---|---|
| Liquid funds | -₹95,743 crore |
| Money market funds | -₹50,846 crore |
| Ultra-short-term funds | -₹11,729 crore |
| Overnight funds | -₹7,281 crore |
| Ultra short-to-short-term funds | -₹6,632 crore |
Liquid and money market funds together recorded withdrawals of approximately ₹1.47 lakh crore, accounting for about 80% of debt-category outflows.
This concentration suggests that liquidity-management and treasury-related activity was an important contributor to September’s outflows, rather than a uniform withdrawal across debt mutual funds.
Which equity categories attracted the most inflows?
Small-cap funds led equity-category inflows in September, attracting ₹9,039 crore. Mid-cap funds received ₹7,835 crore, while flexi-cap funds attracted ₹6,702 crore.
Large and mid-cap funds recorded inflows of ₹4,271 crore, followed by multi-cap funds at ₹3,860 crore.
Despite these subscriptions, AUM declined across several equity categories, including mid-cap, large-cap, flexi-cap, large and mid-cap, thematic and equity-linked savings schemes (ELSS).
The data show that stronger inflows alone were not enough to prevent a monthly decline in equity assets. The figures do not, however, establish whether the increase in subscriptions was driven by investors buying market dips, continuing systematic investment plans (SIPs) or making fresh lump-sum investments.
Why did ETF AUM fall despite fresh investments?
Exchange-traded funds (ETFs) recorded aggregate net inflows of ₹15,501 crore in September. Equity ETFs attracted ₹9,960 crore, while gold ETFs received ₹4,451 crore and silver ETFs ₹1,974 crore.
Yet, overall ETF AUM fell by ₹46,865 crore to ₹11.50 lakh crore. This suggests that fresh investments were outweighed by the combined impact of changes in underlying asset valuations and other factors affecting AUM.
ETF folios increased by 4.03 lakh during the month, providing another indication that the decline in assets did not necessarily reflect a corresponding fall in investor participation.
What should investors make of the decline?
September’s mutual fund data underline the importance of distinguishing between asset growth, investor flows and changes in market valuations.
The industry’s AUM fell by ₹4.44 lakh crore, but net outflows accounted for only ₹1.33 lakh crore of that decline. Meanwhile, equity schemes attracted stronger inflows, total folios increased and ETFs continued to receive subscriptions.
For assessing the industry’s underlying trends, the composition of redemptions, equity mobilisation and changes in investor folios provide additional context beyond the headline AUM figure.
The September data, therefore, do not by themselves establish a broad-based retreat by mutual fund investors. They instead point to concentrated outflows from short-term debt products and valuation-related pressures operating alongside continued investor participation in equity schemes.