Equity Mutual Funds see 335% growth in five years, Small-Cap funds lead returns

Despite market volatility, equity mutual funds (MFs) have emerged as a preferred wealth creation tool for Indian investors. According to Investment Information and Credit Rating Agency (ICRA) Analytics, the net Assets Under Management (AUM) of equity MFs surged 335.31% over the last five years, reaching Rs. 33,32,000 crore (US$ 377.82 billion) in July 2025, up from Rs. 7,65,000 crore (US$ 86.74 billion) in July 2020. Systematic Investment Plans (SIPs) have been a key driver, enabling investors to commit fixed amounts regularly and benefit from rupee cost averaging. Inflows into equity MFs have risen consistently from net outflows of Rs. 3,845 crore (US$ 436 million) in July 2020 to Rs. 42,673 crore (US$ 4.84 billion) in July 2025, marking a YoY increase of 15.08% from Rs. 37,082 crore (US$ 4.2 billion) in July 2024 and a MoM growth of 81.06% over Rs. 23,568 crore (US$ 2.67 billion) in June 2025. Sectoral and thematic funds drew the highest inflows at Rs. 9,426 crore (US$ 1.07 billion), followed by flexi-cap funds Rs. 7,654 crore (US$ 868 million) and small-cap funds Rs. 6,484 crore (US$ 735.2 million), reflecting investors’ preference for diversified allocation and higher returns.
Equity MFs continue to outperform traditional savings instruments such as fixed deposits, offering strong long-term returns even during market volatility. Over the past five years, small-cap funds delivered 31.7%, mid-cap funds 27.36%, and multi-cap and contra/value funds over 24% returns. Experts advise a disciplined, long-term approach, combining SIPs, diversified fund allocation, and avoidance of panic selling. With sustained domestic investor optimism and inflows, the equity MF industry is poised for further growth, reinforcing its role as a key vehicle for wealth creation. Markets tend to reward patience, and the disciplined investor who treats volatility as an opportunity will be the ultimate winner in wealth creation.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.