Purchases of domestic equities by mutual funds declined sharply in February, touching their lowest level in the past three years. According to reports, mutual funds invested around ₹10,381 crore in equities during the month, marking a steep fall from the strong buying activity seen in January.
In January, fund houses had pumped nearly ₹42,355 crore into equity markets, making February’s figure a significant slowdown in comparison.
Weak Inflows and Market Volatility Impact Investments
The decline in equity purchases came alongside weaker inflows into equity-oriented mutual fund schemes. Net inflows into equity funds dropped to ₹24,029 crore in January, representing a seven-month low.
Market volatility and subdued short-term returns from equity schemes have weighed on investor sentiment. Rising geopolitical uncertainties have also made investors more cautious, prompting some to shift funds toward safer assets such as gold exchange-traded funds (ETFs).
Additionally, inflows through systematic investment plans (SIPs) into active equity funds—which had remained relatively strong throughout most of 2025—registered a mild decline during this period.
Fund Managers Eye Opportunities After Market Correction
Despite the recent slowdown in equity buying, several fund managers believe the ongoing market correction could create favourable opportunities for long-term investors.
According to Quant Mutual Fund, the firm has increased its cash allocation with the intention of gradually redeploying capital into equities at more attractive valuations.
The fund house noted that recent corrections and consolidation in the market have brought India’s price-to-earnings (PE) multiples closer to historical averages and better aligned them with macroeconomic fundamentals. It also expects the next phase of the equity market rally to be supported by stronger earnings growth and structural economic reforms.
Summary
Equity purchases by mutual funds fell to ₹10,381 crore in February, marking the lowest level in three years and a sharp drop from January’s ₹42,355 crore investment. The slowdown was driven by weaker inflows into equity schemes, market volatility, and cautious investor sentiment. However, fund managers, including Quant Mutual Fund, believe the recent market correction could offer better opportunities to increase equity exposure at more attractive valuations.
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