Retail investors continued to show confidence in mutual funds in July 2026, with systematic investment plan (SIP) inflows rising to a four-month high of Rs 31,961 crore, reflecting sustained participation despite volatility in the equity markets, according to the latest data released by the Association of Mutual Funds in India (AMFI).
AMFI data showed that active equity funds recorded net inflows of Rs 24,697.39 crore during the month. Among the various equity categories, small cap funds attracted the highest inflows at Rs 7,767.50 crore, followed by mid cap funds with Rs 6,192.31 crore. In contrast, large cap funds witnessed a net outflow of Rs 1,321.69 crore.
Market experts said the continued strength in SIP contributions indicated that investors were looking beyond short-term fluctuations and maintaining a long-term approach towards wealth creation through equities.
"Looking at July's AMFI data, we can see that retail investors are continuing to look beyond short term market volatility and stay committed to equities. SIP inflows reached a four month high of Rs 31,961 crore in July, up 12.3 per cent year on year, reflecting the growing discipline of investors who continue to invest through market cycles," said Feroze Azeez, Joint CEO, Anand Rathi Wealth Limited.
Azeez noted that although equity fund inflows moderated by around 15 per cent month-on-month, the decline did not point towards a broad-based withdrawal from growth-oriented investment categories.
"What stands out is that the moderation has not led to a broad based retreat from growth oriented segments, as small cap funds attracted Rs 7,768 crore, the highest among equity categories, while mid cap funds received Rs 6,192 crore. In contrast, large cap funds saw an outflow of Rs 1,322 crore," he said.
According to Azeez, the divergence in category-wise flows suggests that investors continue to perceive greater long-term growth opportunities in the mid and small cap segments, even as market volatility encourages greater selectivity.
"Importantly, active funds continue to account for around 74 per cent of total equity AUM, highlighting that investors still have a strong preference for active management," he added.
However, experts also cautioned that strong investor interest in certain market segments needs to be viewed against the backdrop of elevated valuations.
Vikas Gupta, CEO and Strategist at OmniScience Capital, said retail investors continued to favour mid and small cap equities, while large cap and flexi cap categories remained comparatively weaker in terms of inflows.
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"The focus on mid and smallcap equities remains with retail investors. Comparatively large cap and flexicap are behind in terms of inflows. Possibly indicates chasing earnings and stock price momentum by the retail," Gupta said.
He cautioned that valuations in some parts of the market have risen significantly, creating risks for investors who enter these segments without considering the possibility of a correction.
"The point of concern with the small and midcap chase is that the respective indexes show significantly high PEs indicating that the underlying stocks are probably overvalued and the price will be sustained only as long as those companies are able to maintain the expected earnings growth," Gupta said.
"Investors should be aware of this risk while allocating to this segment of the market at current valuations," he added.
The latest AMFI data also showed that total assets under management of open-ended mutual funds stood at Rs 85.59 lakh crore as of July 31, 2026, highlighting the continued expansion of the mutual fund industry and the growing participation of retail investors.
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