Top Picks & NFO Opportunities: Where should you invest now in mutual funds? Anil Singhvi explains

Mutual fund inflows remained resilient in March, supported by strong equity participation and record systematic investment plan (SIP) contributions, even as the overall assets under management (AUM) declined due to market correction and seasonal outflows from debt-oriented schemes, market experts said.

“March data is encouraging. Equity inflows remain strong, and investor participation is at record levels,” said Anil Singhvi.

Broad-Based Growth Across Equity Categories

According to the latest data, equity mutual funds recorded inflows of around Rs 44,500 crore during the month, significantly higher compared to the previous month. The rise in inflows was broad-based across categories, including flexi-cap, mid-cap, small-cap and large & mid-cap funds.

“Flows have increased across all equity categories. Flexi-cap and small-cap funds, in particular, saw strong traction during the month,” he said.

Flexi-cap and Small-cap Lead Inflows

Flexi-cap funds witnessed nearly 30 per cent growth in inflows, while small-cap funds also saw a sharp increase. Mid-cap funds and large & mid-cap categories registered steady inflows, reflecting continued investor interest in equities despite volatility in the markets.

AUM Declines on Market Correction

However, the overall MF industry AUM declined from about Rs 82 lakh crore in the previous month to nearly Rs 73 lakh crore in March. Experts attributed this decline primarily to mark-to-market losses due to market correction and substantial outflows from debt funds.

“March typically sees outflows from debt funds due to year-end adjustments. This is a seasonal trend and should not be seen as a structural concern,” Singhvi said.

Debt and Hybrid Funds See Outflows

Debt mutual funds witnessed outflows of around Rs 2.95 lakh crore during the month, while hybrid funds saw outflows of approximately Rs 16,500 crore. Arbitrage funds, which are often used as a proxy for debt investments, also saw sharp withdrawals.

“The outflows were largely concentrated in debt-oriented and arbitrage categories. Equity flows remained intact and strong,” he added.

SIP Contributions Hit Record High

On the retail participation front, SIP contributions continued to hit new highs. Monthly SIP inflows crossed the Rs 32,000 crore mark for the first time, indicating sustained investor confidence and discipline in long-term investing.

“SIP numbers remain very strong. For several months now, inflows have stayed above Rs 29,000 crore, which has become a new base level,” Singhvi said.

SIP Stoppage Ratio Rises

However, the data also showed a sharp rise in the SIP stoppage ratio, which increased to around 99 per cent in March compared to about 76 per cent in the previous month.

“A higher stoppage ratio suggests that closures matched new SIP registrations during the month. This could be due to market volatility or completion of SIP tenures,” he noted.

Passive Funds Stay Resilient

In the passive investing segment, inflows into index funds and exchange-traded funds (ETFs) remained stable. Institutional investors, including EPFO, banks and public sector undertakings, continued to deploy funds into low-cost passive products.

“Passive funds are gaining traction due to lower expense ratios and ease of investment. Institutional participation remains strong in this space,” Singhvi said.

However, commodity-based ETFs showed mixed trends. Gold ETFs witnessed a moderation in inflows, while silver ETFs continued to see outflows for the second consecutive month.

“Investor interest in silver ETFs has declined, while gold flows have also moderated after strong earlier inflows,” he added.

SEBI Proposes MF Gift Cards

On the regulatory front, the Securities and Exchange Board of India (SEBI) has proposed the introduction of mutual fund gift cards, aimed at promoting financial savings and widening investor participation.

“The MF gift card is an innovative concept. It allows individuals to gift investments instead of cash or physical items, which can help inculcate a savings habit,” Singhvi said.

Under the proposal, prepaid gift cards can be issued with a maximum value of Rs 10,000 per instrument. The recipient can use the amount to invest in mutual fund schemes of their choice. The proposal is currently open for public comments.

“The flexibility to choose schemes and the regulated framework make it a secure and transparent instrument,” he added.

Fund Picks, NFOs and Investment Strategy

Experts have recommended flexi-cap funds as the preferred investment category in the current market environment, citing their ability to dynamically allocate across market capitalisations.

“In the current phase, flexi-cap funds offer diversification across large, mid and small caps. Fund manager allocation plays a key role in generating returns,” Singhvi said.

Among the recommended options, HDFC Flexi Cap Fund has been identified as the “Fund of the Month”. Other notable options include Parag Parikh Flexi Cap Fund and Kotak Flexi Cap Fund.

“These funds provide a balanced approach and are suitable in a recovering market where leadership can shift across segments,” he said.

New fund offers (NFOs) remain limited in April, with a few active and passive funds open for subscription. Among active funds, Kotak Multi Asset Fund of Fund and Groww Arbitrage Fund are currently available.

In the passive category, Axis India Defence Index Fund has been highlighted as a key offering tracking the defence sector. “Among the available NFOs, the defence index fund stands out in the passive space for investors looking at sectoral exposure,” Singhvi said.

Experts advised investors to avoid attempting to time the market and instead adopt a disciplined, phased investment approach, especially during volatile conditions.“Timing the bottom is difficult. Investors should consider staggered investments through short-term SIPs or phased allocation,” Singhvi said.

He explained that investors can either invest based on time intervals, such as weekly or monthly instalments, or based on market levels, such as investing on every decline in the index.

“Conservative investors can wait for clarity, while aggressive investors may deploy capital gradually during corrections,” he added.