A significant portion of the withdrawn money is finding its way back into riskier segments of the market
| Photo Credit:
juvaida khatun
Robust systematic investment plan (SIP) inflows into mutual funds have masked a steady surge in redemptions from equity schemes over the past few months, suggesting that a section of informed investors is cashing in on market gains.
Equity scheme redemptions jumped over 38 per cent year-on-year to ₹44,824 crore in July, compared with ₹32,381 crore in the corresponding month last year. On a month-on-month basis, redemptions were up 16 per cent, according to data released by the Association of Mutual Funds in India (AMFI).
Riskier Bets
The trend has been building since April, coinciding with a strong market recovery. As benchmark indices rebounded, with the Nifty gaining around 6 per cent in April, investors increasingly chose to book profits. Equity redemptions have risen consistently since then, climbing 41 per cent during the current fiscal year, from ₹31,861 crore in April to ₹44,824 crore in July.
However, the rising redemptions do not necessarily signal an exit from equities. A significant portion of the withdrawn money is finding its way back into riskier segments of the market, particularly mid-cap and small-cap funds, despite concerns over stretched valuations following their sharp rally
Growing appetite
Valuation data underscores the growing appetite for these segments. Small-cap stocks were trading at a premium of about 11 points to the Nifty 50’s price-to-earnings (P/E) ratio last month.
The Nifty Smallcap 100 was trading at a P/E multiple of 32 times, meaning investors were willing to pay ₹32 for every ₹1 of net profit generated by companies in the index. Similarly, the BSE SmallCap 250 index commanded a valuation of 35 times earnings, compared with 21 times for the Nifty at the end of July.
Mid-cap stocks, too, continue to trade at elevated valuations. Mid-caps are quoted at P/E multiples of around 34 times, supported by strong earnings growth of nearly 30 per cent. The benchmark Nifty Midcap 150 Index traded at a P/E ratio of 30 times last month, while the average P/E ratio for large-cap stocks tracked by the Sensex stood at 32 times.
Akshat Garg, Head of Research and Product at Choice Wealth, said the rise in equity redemptions was partly due to profit booking and the rotation of funds rather than exits. “Large-cap funds last month saw a net outflow of ₹1,322 crore, while small-cap funds recorded an inflow of ₹7,768 crore and mid-cap funds ₹6,192 crore. Investors are harvesting gains at the top of the market-cap curve and redeploying down it,” he said.
Aakanksha Shukla, AVP-Wealth Management, Master Capital Services, said SIPs continue to anchor domestic equity flows, even as redemptions from equity schemes have been trending higher, pointing to selective profit-booking amid elevated valuations and volatile global cues.
“While fixed-return avenues offer a cushion against market swings, they typically trail equities over the long term. The trend underscores a broader shift toward balanced portfolios as investors weigh growth potential against near-term uncertainty,” she added.
Rajkumar Rathi, Chief Investment Officer, YES Securities, said retail investors are displaying structural maturity by keeping systematic commitments active through short-term corrections and market consolidation periods with higher participation across equity, hybrid and passives.
“Recent market behaviour suggests heightened risk appetite among retail investors, with growing allocations to small and mid cap funds and even contrarian bets amid volatility,” he said.
Published on August 16, 2026