MF flows turn negative in Dec-25 on quarter end outflows

30 Jan 2026 , 12:32 PM

HOW MF FLOWS HAPPEN AND WHY THEY MATTER?

We have generally heard statements like mutual fund flows are positive or negative. What does that mean. On a regular basis, mutual funds see fresh purchases and redemptions. The net amount is the net flow into mutual funds. AMFI publishes this flow data each month, which gives a picture of which specific fund categories are attracting buying and which are attracting selling interest. December 2025 saw net outflows from mutual funds to the tune of ₹ (66,591) Crore. This is normal as companies redeem their holdings in liquid funds, money market funds and other short-term funds to pay advance taxes to the government. That is what creates the negative flow in debt funds each quarter end.

Having seen what are net MF flows, let us turn to the sources of such flows. Broadly, there are three sources of flows into mutual funds. Firstly, there are the new fund offerings (NFOs) that raise money for the first time from the market. In Dec-25, total NFO collections were to the tune of ₹4,074 crore across 23 MF schemes. Nearly 60% of the inflows came from the Abakkus Flexi Cap fund NFO. Secondly, there the systematic investment plan (SIP) flows. In Dec-25, SIP inflows were at a record ₹31,006 Crore. However, it must be noted that AMFI only discloses gross SIP flows and not net SIP flows. The third source of MF flows are the net lumpsum buying in MFs. The sum total of these three items adds up to net MF flows in any month. When you add the capital appreciation in any month to this flows data, you get the justification for change in AUM between two months. Over to the numbers, now!

HOW THE MF FLOW NUMBERS ADDED UP?

We look at how the flow numbers of various categories of funds added up in Dec-25.

Fund Category	Gross Inflows (₹ Crore)	Redemptions (₹ Crore)	Net Flows (₹ Crore)	Total AUM (₹ Crore)
Active Debt Funds	13,00,870.44	14,33,280.81	-1,32,410.37	18,09,978.46
Active Equity Funds	68,983.25	40,929.19	28,054.06	35,72,543.53
Hybrid Allocation Funds	46,909.83	36,154.26	10,755.57	11,00,421.73
Solution Funds	602.62	257.29	345.33	58,454.67
Passive Funds	48,993.11	22,269.87	26,723.24	14,56,806.28
Open-Ended Funds	14,66,359.25	15,32,891.43	-66,532.18	79,98,204.67
Closed-Ended Funds	15.74	74.26	-58.52	25,174.33
Mutual Funds Grand Total	14,66,374.99	15,32,965.69	-66,590.70	80,23,378.99

Data Source: AMFI

The above table covers the macro picture of each category of mutual funds in terms of flows in December 2025. Here are some findings.

• The sell-off in December was triggered by Debt funds, which is part of regular quarter end advance tax payment provision. This normally reverses in the next month.
• Flows into active equity funds have slowed amidst elevated levels of the market, rising market uncertainty and a more non-directional movement in the Nifty.
• The big positive surprise in the month was the strong flows into passive funds. While index ETFs and index funds played a part; the flows were led by gold and silver ETFs.

While the flows were negative, the AUM has not fallen too sharply compared to November. That is more due to positive impact of capital appreciation in December 2025.  Let us now turn to category-wise flow details of specific funds.

1)    ACTIVE DEBT FUNDS: SHORT END OUTFLOWS HEAVY

The month of December saw net outflows on account of quarterly advance tax payments by corporates. Net outflows for the month stood at ₹ (1,32,410) Crore. Which were the specific categories that saw maximum net selling? Liquid funds dominated debt fund outflows at ₹ (47,308) Crore; followed by Money Market Funds ₹ (40,464) Crore. Strong debt fund selling was also seen in Ultra Short Duration Funds ₹ (17,648) crore and Low Duration Funds ₹ (10,246) Crore. In the longer-term category, Corporate Bond Funds saw net selling to the tune of ₹ (7,420) Crore in December 2025. Previous experience has been that most of such outflows have come back in the subsequent months.

2)    ACTIVE EQUITY FUNDS: FLEXI-CAP FUNDS RULE THE ROOST

December 2025 saw lower net inflows into equity funds at ₹28,054 Crore. All categories, barring Dividend Yield Funds and ELSS funds, saw positive inflows. Active equity fund flows are over -35% since the July 2025 peak. Big drivers of inflows into equity funds were Flexi-Cap Funds ₹10,019 Crore, Mid-Cap Funds ₹4,176 Crore, Large & Mid-Cap Funds ₹4,094 Crore, Small Cap Funds ₹3,824 Crore, and Multi-Cap Funds ₹2,255 Crore. The focus continues to be on allocation across capitalization and alpha hunting. The urge to bet on specific themes and sectors has reduced as markets have become more complex. Within allocation, the focus is more on flexi-caps, Large & Mid-Caps, and Multi-Caps; while in alpha hunting, the focus is on mid-cap funds and small-cap funds. It is positive that the obsession with sectoral and thematic hunting has reduced.

3)    HYBRID FLOWS LED BY MULTI-ASSET APPROACH

For simplicity, we have combined hybrid funds and solution funds into a single category. Hybrid fund net inflows were robust at ₹11,101 Crore in December 2025. Net inflows were dominated, once again, by Multi-Asset Allocation Funds (MAAF) at ₹7,426 Crore, Aggressive Hybrid Funds ₹1,514 Crore, and Balanced Advantage Funds ₹1,097 Crore. Only Conservative Hybrid Funds saw marginal negative outflows in the month of December 2025. The interest in hybrid funds started off with an allocation approach, but has gradually become more of a multi-asset approach, especially the spread across precious metals.

4)    PASSIVE FLOWS THE BIG POSITIVE SURPRISE OF DEC-25

Perhaps, the biggest story that defined the MF flow narrative in December 2025 was passive funds. This category includes funds that do not entail any active management. It is a motley mix comprising of index funds and ETFs liked to equity indices; index funds and ETFs linked to debt indices; Fund of Funds (FOFs) linked to global indices; and commodity ETFs linked to precious metals like Gold and Silver. Let us talk about flows into this segment.

For December 2025, passive funds saw record net inflows of ₹26,723 Crore. Let us now look at the Big-4 flows. Gold ETFs saw net inflows of ₹11,647 Crore, Equity Index ETFs ₹8,981 Crore, Silver ETFs ₹3,962 Crore, and Equity Index Funds ₹3,149 Crore. The passive flows were dominated by precious metal ETFs and index products linked to equity indices. Once again, it was a hint that passive logic was being used effectively for multi-asset play.

Till now we have looked at flows into mutual funds in December 2025, which is a key determinant of the shift in AUM. However, flows are too macro a picture and do not talk much about the retail intensity of the participation. That is better captured by the folios.

FOLIO GROWTH –DIFFERENT WAY TO LOOK AT MF GROWTH

Folios are investor accounts with an AMC. Typically, an investor will need one unique folios number per AMC. If your mutual fund investments are spread across 5 different AMCs, then you need 5 folios. One folio is sufficient for all MF investments with one AMC. The folios are important as they show the retail spread. Folios are not unique investors, that is captured by the PAN based investor count. But folios capture the retail spread better than flows or AUM. Here is the folios for key categories of mutual funds as of December 2025.

Fund Category	Total Folios (Dec-2025)	Total Folios (Dec-2024)	Growth in Folios (yoy)
Active Debt Funds	79,95,618	68,24,169	17.17%
Active Equity Funds	17,84,76,267	15,74,96,827	13.32%
Hybrid Allocation Funds	2,40,57,860	2,12,29,767	13.32%
Passive Funds	5,02,34,958	3,89,19,288	29.07%
Folios (Open-Ended Funds)	26,07,64,703	22,44,70,051	16.17%
Folios (Close-Ended Funds)	4,89,133	5,33,494	-8.32%
Total Mutual Fund Folios	26,12,53,836	22,50,03,545	16.11%

Data Source: AMFI (All data is actual numbers)

Here is what we can read from the table on folio growth for December 2025.

• Over the last one-year mutual funds added a total of 3.63 Crore folios across all categories of mutual funds. This is a yoy comparison.
• The percentage growth in folios has been the best (29.1%) in the case of passive funds, which is indicative of the direction of retail interest in last one year.
• Interestingly, the growth in folios of active debt funds is higher than active equity funds, which shows the rising retail appetite for debt funds amid falling interest rates.
• Closed-ended funds are now almost an insignificant part of the overall mutual fund picture, and has been seeing folio contraction for some time.

KEY TAKEAWAYS FROM THE MUTUAL FUND FLOW STORY

From an investor’s perspective, here are some key takeaways from the story of mutual fund flows in December 2025.

• Mutual fund flows in December 2025 were largely determined by the quarter-end tax payout management by corporates. That explains the heavy selling in short-end debt funds. Other categories have seen normal flows.
• Active equity funds have seen gradual drop in flows at higher levels of the market as the scope for alpha drops. This is compensated by the sharp flows into passive debt funds as investors prefer index products and funds linked to precious metals.
• MF flows come from NFOs, SIP flows, and lumpsum flows. In December 2025 NFOs were subdued, but it was SIP flows and lumpsum flows that accounted for bulk of the mutual fund flows in the month.

December 2025 MF flows have been subdued largely due to quarter end advance tax considerations. The coming months should give a more structure picture of flows.

 

LLM Summary Mutual fund flows in December 2025 were negative on account of quarterly outflows. The positive flows were the most pronounced in active equity funds and passive funds. Fund categories getting best flows include flexi-cap funds, Equity index ETFs, and gold ETFs. Fund flows give an idea of the specific fund categories that are attracting the most investor interest. Fund flows are determined by new fund offers, Systematic Investment Plans, and lumpsum purchases in mutual funds. While flows give a good macro picture of the direction of investors, the specific retail investor picture is presented better by the folio growth. Mutual fund folios have grown by 16.2% overall, with passive funds leading the folio growth story. Some broad trends seen in the last one year. In terms of folios, there is a move against active equity funds and in favour of debt funds. The overall trend has been gradually shifting from active equity funds towards passive funds.