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    Home»Mutual Funds»Market uncertainty: How mutual fund investors should approach it
    Mutual Funds

    Market uncertainty: How mutual fund investors should approach it

    March 24, 2025


    Indian equity markets have faced sharp volatility over the last six months. Since September 2024, Nifty 50 has dropped 15.65%, Nifty Midcap 100 is down 21.14%, and Nifty Small Cap 100 has fallen 23.94%.

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    Scheme Name 1-Year Return Invest Now Fund Category Expense Ratio
    Axis Nifty 50 Index Fund +32.80% Invest Now Equity: Large Cap 0.12%
    Axis Nifty 100 Index Fund +38.59% Invest Now Equity: Large Cap 0.21%
    Axis Nifty Next 50 Index Fund +71.83% Invest Now Equity: Large Cap 0.25%
    Axis Nifty 500 Index Fund — Invest Now Equity: Flexi Cap 0.10%
    Axis Nifty Midcap 50 Index Fund +46.03% Invest Now Equity: Mid Cap 0.28%

    This has impacted inflows into mutual funds, which fell to a 10-month low in February 2025.

    Despite the turbulence, experts recommend that investors remain disciplined and avoid impulsive decisions.

    According to ICRA Analytics, inflows into open-ended equity mutual funds dropped by 26.17% month-on-month in February 2025, with total mutual fund inflows plunging 78.64% to ₹40,063 crore from ₹1.87 lakh crore in January.

    The decline reflects investor caution amid global uncertainties, tariff-related concerns, and weak market sentiment.

    Sectoral and thematic funds, previously popular, also saw reduced inflows due to underperformance in key sectors such as defense.

    Small and mid-cap funds bore the brunt of investor exits, with inflows declining 34.93% and 33.82%, respectively, on a monthly basis.

    However, on a yearly basis, small-cap fund inflows were up 27.37%, while mid-cap funds saw an 88.42% rise.

    Ashwini Kumar, Senior Vice President and Head of Market Data at ICRA Analytics, noted that during volatile periods, investors tend to shift toward large-cap funds, which offer more stability.

    “When markets are uncertain, investors prefer large-cap funds as these hold companies with strong balance sheets and stable earnings growth,” he said.

    Despite the market correction, Ventura’s latest market update suggests that India’s long-term growth story remains intact.

    In February 2025, domestic institutional investors (DIIs) were net buyers at ₹64,599 crore, while foreign institutional investors (FIIs) sold equities worth ₹34,574 crore.

    Meanwhile, the mutual fund industry’s total assets under management (AUM) declined to ₹64.53 lakh crore from ₹67.25 lakh crore in January.

    One key takeaway for investors is the role of Systematic Investment Plans (SIPs) in navigating market cycles. Monthly SIP inflows stood at ₹25,999 crore in February, slightly lower than ₹26,400 crore in January.

    Experts emphasise that continuing SIPs during market downturns allows investors to accumulate units at lower prices, which can lead to higher returns in the long run.

    Aniruddha Naha, CIO – Alternatives at PGIM India AMC, believes that the current correction presents an opportunity.

    “The correction in stock prices and early signs of a recovery in earnings make this a good time to start building a long-term mid and small-cap portfolio. While volatility will persist, much of the price correction has already occurred, and investors should consider accumulating over the next six months,” he said.

    Experts recommend that investors focus on asset allocation, risk management, and long-term investment discipline. Those who stay invested through market downturns benefit from compounding and recovery.

    ALSO READ | What is SIP stoppage ratio and why it is at an all-time high



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