Hybrid mutual fund schemes witnessed a moderation in net inflows during FY25, drawing Rs 1.19 lakh crore — an 18 per cent decline from the previous fiscal — amid market turbulence in the latter half of the year driven by corporate earnings slowdown and geopolitical tensions. However, investor participation and assets under management (AUM) in the category showed strong growth, underscoring sustained investor confidence in hybrid offerings.
According to data from the Association of Mutual Funds in India (Amfi), the number of hybrid fund folios surged to 1.56 crore in March 2025 from 1.35 crore a year earlier, indicating an addition of over 33 lakh investors. Meanwhile, the AUM of hybrid schemes grew 22 per cent to Rs 8.83 lakh crore from Rs 7.23 lakh crore in FY24, according to PTI.
A key factor behind this resilience has been the balanced structure of hybrid funds, which invest in a mix of equity and debt instruments, offering drawdown protection through the debt component. This makes them a preferred choice for investors seeking a more stable investment experience compared to pure equity funds.
“The drawdown protection offered by the debt component of hybrid schemes is a key reason, as it allows investors to stay invested without the stress that comes with pure equity volatility,” said Trivesh D, COO of Tradejini.
Despite the dip in inflows from Rs 1.45 lakh crore in FY24 to Rs 1.19 lakh crore in FY25, the hybrid category continues to perform better compared to FY23, which saw a net outflow of Rs 18,813 crore. The decline in FY25 inflows is attributed to weaker market sentiment in the second half of the year and a significant drop in new fund offers (NFOs) — from 21 in FY24 to just 12 in FY25.
Feroze Azeez, Joint CEO of Anand Rathi Wealth Ltd, said, “The slowdown in inflows majorly happened in the second half of FY25 due to market turbulence driven by corporate earnings slowdown, election uncertainty, geopolitical tensions, and a dip in NFOs in this category.”
The broader mutual fund industry added over Rs 12 lakh crore to reach a record AUM of Rs 65.74 lakh crore as of March 2025.
Hybrid funds continue to attract investors with moderate or low-risk profiles, offering the advantage of equity market participation with reduced volatility and increased portfolio stability through debt exposure. A change in taxation on debt funds also played a role in increasing interest in hybrid schemes.
With ongoing rate cycle uncertainty, global risk-off sentiment, and elevated domestic market valuations, experts believe hybrid funds will remain an attractive option. Trivesh of Tradejini expects investors to favour funds that offer a balance of growth and protection. Azeez from Anand Rathi recommends an 80:20 equity-to-debt strategy for navigating volatile markets, enhancing stability and liquidity in portfolios.
