Inflows into multi-cap funds saw a sharp drop of 20% in FY26, as flexi cap and diversified schemes gained popularity. While the latter two categories attracted Rs 89,213 crore and Rs 65,209 crore, multi-cap funds received only Rs 33,200 crore – down from Rs 44, 282 crore in FY25. In fact, this was the only category that saw a fall in the inflows in equities.
Experts said a major reason for this is that multi-cap funds require a minimum 25% allocation in small, large and mid-caps each while flexi-cap schemes require a minimum 65% allocation in equity with no further limit on allocation across market caps.
Market Volatility
Anand Varadarajan, chief business officer, Tata Mutual Fund believes that investors are choosing flexi cap funds due to more flexibility to move across market caps, allowing the investor to participate in the markets without constraints related to allocation.
Karthikraj Lakshmanan, senior vice president – equity, UTI AMC added that that the correction in the market, as seen in the last one and a half years, affects the multi cap category more due to higher exposure to mid and small cap segments leading to higher volatility and drawdowns. Lakshmanan attributed the high inflows in the multi-asset allocation category to higher returns in gold and silver in last 1-2 years.
Rajesh Jayaraman, head – products, Nippon India Mutual Fund said that the migration of many multi-cap funds to flexi cap category has made the category’s AUM lower. He backed the category in the current markets saying that multi cap funds offer a well-balanced equity portfolio with optimal mix of large, mid and small caps at all times, which makes them well positioned to capture potential opportunities in current times where broader valuations appear better.
Future Growth
He added that the category could offer a simple and effective solution to investors who find it difficult to allocate across market caps during uncertain times.
While the category had a lean FY26 in terms of inflows, Lakshmanan believes that the scope for this category is high and as the investors realise the potential of the category, the inflows and AUM might catch up in the future.