Mid-cap Fund Inflows Drop, Gold ETFs Surge

October 2025 has witnessed a notable shift in the Indian mutual fund landscape. Inflows into mid-cap and small-cap funds have declined significantly, with mid-cap funds seeing a drop of 25% and small-cap funds a decrease of 20%. This change comes as overall equity inflows reported an 18.84% decline, falling from Rs 30,422 crore in September to Rs 24,690 crore in October.

In stark contrast, gold exchange-traded funds (ETFs) have seen a remarkable surge. Inflows into gold ETFs reached Rs 7,743 crore in October, following Rs 8,363 crore in September. The assets under management (AUM) for gold ETFs have skyrocketed by Rs 30,000 crore in just two months, crossing the Rs 1 lakh crore mark. This trend reflects a growing preference for safer investments as investors show increased interest in commodities like gold and silver.

Akhil Chaturvedi, Executive Director at Motilal Oswal Asset Management Company, pointed out that the current trends indicate a clear shift in asset allocation. With a 300% increase in net sales of gold ETFs over the last two months, investors are diversifying their portfolios. Multi-asset funds, which also have exposure to gold, are seeing sustained flows, indicating a strong demand for these investment options.

The decline in mid-cap and small-cap fund inflows can be attributed to concerns over high valuations and the influx of high-priced IPOs into the market. However, despite this moderation, the overall trend still reflects sustained investor confidence in equities. Systematic investment plans (SIPs) have shown marginal growth, reaching Rs 29,530 crore in October, a slight increase from Rs 29,360 crore in September.

Venkat N Chalasani, CEO of AMFI, noted that the total assets under management in the mutual fund sector have reached an all-time high of Rs 79.9 lakh crore, driven by strong retail participation and record SIP inflows from over 9.45 crore contributing accounts. This indicates a growing maturity among Indian investors who are increasingly adopting disciplined, long-term investing strategies.

As the demand for gold and silver ETFs rises, it highlights the need for investors to hedge against market volatility. The current market dynamics underscore the importance of adapting investment strategies in response to changing conditions, showcasing the evolution of financial awareness among Indian investors.