DEBT FUND SELLING DOMINATES THE SEPTEMBER QUARTER-END

DEBT FUND SELLING DOMINATES THE SEPTEMBER QUARTER-END

MUTUAL FUND FLOWS SEPTEMBER 2026 – RAPID FIRE

In September 2026, open-ended mutual funds saw net inflows of ₹(1,33,060) Crore across categories. Here is a quick look at the key flow narratives.

Debt funds saw big outflows of ₹(1,83,156) Crore. The selling was at the short end in liquid funds, money market funds, overnight funds etc amid FCNR liquidity glut.

Equity Fund inflows were 30.6% higher MOM at ₹38,307 Crore. Small cap, mid-cap and flexi-cap funds dominated inflows. Alpha and allocation were the key themes.

Hybrid funds saw flat net inflows of ₹61 Crore. Inflows into MAAFs, were largely neutralized by outflows from arbitrage funds as part of treasury operations.

Passive fund inflows were tad higher at ₹11,728 Crore for September 2026, as debt ETFs faced sharp pressure; while equity, gold, and silver ETFs saw positive flows.

The NFO collections in September 2026 tapered back to ₹2,708 Crore, while gross SIP flows in September 2026 again touched an all-time high of ₹32,490 Crore.

Let us turn to flow significance as a share of net AUM.

MF FLOW SIGNIFICANCE – THE MACRO PICTURE

When it comes to mutual fund flows; two things matter. The size of the flows and whether the swing is on the positive or negative side? Here is a quick macro picture.

Data Source: AMFI (# - Only open-ended funds)

The big theme in September was treasury outflows, being the end of quarter and advance tax deadlines coming up. The aggressive selling at the short end could also be attributed to the lowering of short-term rates amid a big liquidity glut caused by FCNR(B) swap into rupees.

ACTIVE DEBT FUNDS: HEAVY REDEMPTIONS IN DEBT FUNDS

In the case of debt funds in September 2026, 14 out of the 17 categories of debt funds saw net outflows. However, the bulk of the heavy outflows were concentrated at the short end of the yield curve as corporates rushed to meet advance tax deadlines.

Data Source: AMFI

The ranking of the above funds has been done on the significance of Flow/AUM ratio, irrespective of whether it is positive or negative. Clearly, the bias is evident when we notice that 4 out of the 5 most significant flows were on the negative side. Even the positive flows into sectoral debt funds were skewed due to the small base and the novelty factor.

ACTIVE EQUITY FUNDS: ALPHA HUNTING AND ALLOCATION SHARE THE POINTS

In the case of equity funds in September 2026, a total of 11 out of 13 fund categories saw net inflows while ELSS and Contra Funds saw outflows. Since the last 2 months; thematic funds and contra funds have been given a more granular classification of flows.

Data Source: AMFI

The 5 most significant in terms of Flow/AUM are all on the positive side. While small cap funds, mid-cap funds, and sectoral funds represent alpha hunting, multi-cap funds and large & mid-cap funds are more about market-cap agnostic allocation. These have been core themes.

HYBRID ALLOCATION FUNDS: ARBITRAGE FUNDS NEUTRALIZE MAAF INFLOWS

In the case of hybrid funds (including solutions funds and life cycle funds) in September 2026; 8 out of 12 hybrid categories saw positive flows. The net impact was almost flat. Among the key contributors, arbitrage fund outflows offset the inflows into MAAFs. At the same time, equity savings fund outflows offset the inflows into aggressive hybrid funds.

Data Source: AMFI

One will have to take this ranking with a pinch of salt. The top 3 are the newly introduced lifecycle funds. In each of these cases, the flow/AUM looks exaggerated due to the novelty factor and the low AUM base. With equity, debt, and precious metals volatile in recent months, hybrid funds are not offering the unique advantage they used to in the past.

PASSIVE FUNDS: LONG ON EQUITY & PRECIOUS METALS; SHORT ON DEBT

In the case of passive funds in September 2026; 4 out of the 11 fund categories saw net outflows. Here is the list of the most significant flow categories.

Data Source: AMFI

Debt index funds and Debt ETFs are under pressure. The risk of a hawkish RBI stance is making debt fund investors cautious, and it already has a tax disadvantage. The real flow is still concentrated into equity ETFs, equity index funds, gold ETFs and silver ETFs. Lower prices of gold and silver have resulted in a retail surge in demand. In many of the international funds, the gains are being offset by the rupee weakness. For now, there is enthusiasm on passive equity and commodity asset classes!