India’s mutual fund industry continued to attract strong investor participation in August 2026, with equity mutual funds recording their 66th consecutive month of positive inflows, even as debt funds saw a sharp reversal from July’s exceptionally high inflows.
The industry’s net AUM rose 1.5% month-on-month to ₹87.08 lakh crore in August, from ₹85.76 lakh crore in July, according to AMFI data. Average AUM stood at ₹88.31 lakh crore during the month.
While equity flows strengthened, debt-oriented mutual fund categories recorded net outflows of ₹8,711 crore in August, compared with massive net inflows of ₹1.88 lakh crore in July. According to Morningstar Investment Research India, the sharp swing largely reflects corporate and institutional treasury movements rather than a broad-based deterioration in investor appetite for fixed income.
Equity inflows jump nearly 19%
Equity-oriented mutual fund schemes attracted ₹29,328 crore in net inflows in August, up from ₹24,697 crore in July, marking an increase of nearly 19% month-on-month.
Himanshu Srivastava, Principal, Manager Research, Morningstar Investment Research India, said the pick-up was encouraging, particularly because headline equity markets remained somewhat subdued during the month.
The continued flows indicate that domestic investors are increasingly willing to look beyond short-term market volatility, with SIP investing, growing awareness of mutual funds as a long-term wealth-creation vehicle and confidence in India’s longer-term economic and corporate earnings outlook providing support to equity flows.
Investor sentiment was also supported by improving corporate earnings and a return of foreign investors to Indian equities. FPIs remained net buyers for the second consecutive month in August, according to Srivastava.
Small-cap funds lead equity inflows
Small-cap funds attracted the highest net inflows among equity categories at ₹7,973 crore in August, slightly higher than ₹7,768 crore in July.
Mid-cap funds followed with ₹6,989 crore, compared with ₹6,192 crore in July.
The preference for these categories coincided with relative strength in broader markets, with mid- and small-cap indices outperforming large-cap benchmarks during August.
According to Srivastava, the sustained flows suggest investors remain confident about the long-term growth potential of emerging businesses despite elevated valuations in parts of the market. However, he cautioned that investors need to remain mindful of the higher volatility inherent in mid- and small-cap segments.
Flexi-cap funds remain popular
Flexi-cap funds continued to see strong investor interest, with inflows increasing to ₹5,059 crore in August from ₹4,709 crore in July.
Their ability to dynamically allocate across market capitalisations continues to make flexi-cap funds attractive for investors looking for diversified equity exposure, Srivastava said.
Large & mid-cap funds received ₹3,873 crore, while multi-cap funds attracted ₹3,733 crore, showing continued demand for diversified strategies across market segments.
Large-cap funds, meanwhile, continued to see redemptions. However, outflows moderated to ₹1,147 crore from ₹1,322 crore in July.
Sectoral and thematic funds together attracted ₹1,713 crore, including ₹592 crore through NFOs. Excluding NFO collections, flows into these categories have moderated in recent months, pointing towards greater caution around concentrated sector and theme-specific investments.
“Large-cap funds actually saw net outflows of over ₹1,000 crore. Since the market bottomed in March, mid- and small-caps have led the rally, while large caps have remained laggards. Investors have clearly participated in this trend, with flows into mid- and small-cap funds remaining strong over the past two to three months.
ELSS is another category worth watching. With the new tax regime reducing the relevance of Section 80C benefits, tax-saving funds have seen sustained outflows. The primary attraction of ELSS was the tax benefit, and without that incentive, investor interest has naturally declined,” said Santosh Joseph, CEO, Germinate Investor Services.
“Equity mutual fund inflows rose 19% month-on-month (m-o-m) to Rs 29,329 crore in August 2026 from Rs 24,697 crore in July, reversing the fall of 14.8% seen in the prior month. Investors continued to favour small and midcap categories as small-cap funds pulled in Rs 7,973 crore, though the pace of growth moderated to just 2.6% m-o-m after July’s sharp jump of 38.7%. Mid-cap and large & mid-cap funds saw healthy gains, up 13% each. Large-cap funds continued to see outflows, though the quantum narrowed to Rs 1,147 crore from Rs 1,322 crore in July, suggesting the pullback from large-cap bets may be stabilising. Flexi Cap continues to hold its position as the largest actively managed equity category, with AuM rising further to around Rs 6.11 lakh crore from Rs 6 lakh crore last month, which tells us investors still value the flexibility of unconstrained mandates, while multi-cap inflows rose 16%,” said Vineet Jain, Senior Director, CareEdge Ratings.
Debt funds reverse sharply from July
The debt mutual fund picture was markedly different.
Debt-oriented categories recorded net outflows of ₹8,711 crore in August, compared with ₹1,87,511 crore of net inflows in July.
However, the sharp month-on-month reversal should not necessarily be interpreted as a collapse in fixed-income demand. According to Morningstar’s analysis, the movement was primarily driven by liquidity-oriented categories and appears to reflect tactical corporate and institutional treasury movements.
The volatility of monthly debt flows can therefore be significantly influenced by large institutional cash-management decisions.
Overnight Funds see ₹30,654 crore outflow
Overnight Funds recorded the biggest outflow among debt categories, with investors withdrawing ₹30,654 crore in August. The category had attracted ₹40,413 crore in July.
Liquid Funds, however, continued to attract money, receiving ₹19,934 crore during August.
Money Market Funds recorded ₹11,735 crore of inflows, while Ultra Short Duration Funds attracted another ₹4,257 crore.
The contrasting flows suggest that investors continued to use shorter-duration and liquidity-oriented funds for tactical cash management, even as money moved out of Overnight Funds.
Duration funds see broad-based withdrawals
Duration-oriented categories largely remained under pressure during August.
Short Duration Funds recorded ₹4,259 crore of net outflows, while Corporate Bond Funds saw withdrawals of ₹3,190 crore.
Low Duration Funds recorded ₹2,469 crore of outflows, while Gilt Funds saw investors withdraw ₹1,824 crore.
Banking and PSU Funds recorded outflows of ₹1,288 crore, while Dynamic Bond Funds and Long Duration Funds saw comparatively smaller outflows of ₹643 crore and ₹365 crore, respectively.
According to Srivastava, the cautious positioning towards duration-oriented categories needs to be viewed against an uncertain interest-rate environment.
While the RBI kept policy rates unchanged, concerns around inflation and the future direction of monetary policy increased during August.
At the same time, elevated global bond yields and oil prices put upward pressure on domestic yields. This backdrop may have made investors more cautious about taking significant duration exposure.
Floating Rate Funds were among the exceptions, recording ₹182 crore of net inflows. Credit Risk Funds saw a modest ₹23 crore outflow after attracting inflows in July.
Overall, August debt flows suggest that investors continued to favour liquidity and relatively shorter-duration strategies, while remaining selective about funds carrying greater interest-rate sensitivity.
Gold
Gold ETFs witnessed a notable pick-up in investor interest in August 2026, garnering net inflows of approximately Rs 2,597 crore, up around 67% from Rs 1,559 crore in July. The acceleration in flows coincided with a strong recovery in gold prices during the month and indicates renewed investor preference for the asset class amid persistent macroeconomic and geopolitical uncertainties. Gold rallied sharply in August, supported by broad-based global ETF buying, a weaker US dollar, and shifting expectations around US monetary policy.
“The stronger flows also reflect gold’s continued appeal as a portfolio diversifier and a hedge against uncertainty. While geopolitical concerns remained an important underlying support, uncertainty around the US Federal Reserve’s interest-rate trajectory, inflationary pressures, and concerns around global fiscal and debt dynamics added to gold’s safe-haven appeal. Globally, gold ETF flows were particularly strong during August and contributed meaningfully to the sharp rise in gold prices during the month,” said Himanshu Srivastava, Principal, Manager Research, Morningstar Investment Research India.
On a cumulative basis, Gold ETFs attracted net inflows of approximately Rs 41,475 crore during January-August CY2026.
“What is particularly interesting is the growing role of gold within investor portfolios. Gold ETFs saw net inflows of ₹2,597 crore in August 2026, compared with ₹2,190 crore in August 2025, a rise of 18.58%. More significantly, Gold ETF AUM has risen from around ₹72,496 crore a year ago to over ₹1.91 lakh crore now, marking a sharp increase of roughly 163%. This reflects both stronger investor participation and the impact of gold’s performance over the period.
The trend suggests that investors are increasingly looking at gold beyond its traditional role as a store of value. The availability of transparent, market-linked vehicles such as Gold ETFs and Gold ETF Fund of Funds is making it easier to incorporate gold into diversified portfolios,” said Kartik Jain, MD & CEO, Shriram AMC.
SIP assets cross ₹18.6 lakh crore
Systematic Investment Plans remained one of the strongest pillars of mutual fund participation.
SIP assets stood at ₹18,61,652 crore in August, up 2.8% during the month and accounting for around 21.4% of the industry’s total AUM.
Monthly SIP contribution stood at ₹32,297 crore, while the number of contributing SIP accounts crossed the 10-crore mark to reach 10,01,78,903.
The sustained SIP flows are significant because they indicate that investors are continuing to commit money regularly despite short-term market movements.
Mutual fund folios rise to 28.35 crore
The number of mutual fund folios increased to 28.35 crore in August, with 26.54 lakh net folios added during the month.
Retail mutual fund AUM, covering equity, hybrid and solution-oriented schemes, rose to ₹51.73 lakh crore, from ₹50.69 lakh crore in July.
Retail folios in these categories also increased to 21.62 crore, from 21.40 crore in July.
SIF assets jump 34.5%
The emerging Specialised Investment Fund category continued to expand rapidly.
SIF assets rose 34.5% month-on-month to ₹31,175 crore in August. The category recorded ₹7,699 crore of inflows, driven by hybrid and equity-oriented investment strategies.
Three new equity-oriented investment strategies were launched during the month and collectively mobilised ₹1,420 crore.
26 schemes raise ₹7,110 crore
Mutual fund houses launched 26 schemes in August, collectively raising ₹7,110 crore.
The launch activity came against the backdrop of continued equity inflows and growing retail participation, while debt flows remained more volatile because of institutional treasury movements.