Mutual fund investors are becoming cautious. For the first time since 2022, the industry has recorded a net off in the systematic investment plan (SIP) accounts, according to a report by Elara Capital.
At the same time, mutual funds have increased to a 15-year high, depicting the weight-end view of the cash holdings fund managers.
Sip net closures raise red flags
SIP accounts remained flexible during previous reforms-as Russia-Ukraine crisis in 2022-23-this trend has now reversed.
The number of SIP account closures has been increasing since the beginning of 2025.
Elara Capital said in the report, “This is a worrying sign. SIPS is considered the most stable form of the most stable form. The trend of pure bandh suggests a change in investor spirit.”
The outright currents have also slowed down since its peak in October 2024. That month saw a flow of 43,000 crore in mutual funds, led to ET 21,400 crore ETFs and index funds. Since then, the flow has been continuously modeled.
Mutual funds have highest cash since 2010
The fund managers are sitting on a pile of big cash. In March 2025, the total cash in equity schemes increased to ₹ 1.96 lakh crore ($ 23 billion), which had increased from ₹ 1.74 lakh crore from last month.
These are the highest levels since December 2011 and November 2018.
Large-cap schemes have more than 4.8% cash in cash, but still the highest since June 2023.
Most asset management companies (AMCs) are increasing their cash buffers.
“This widespread-based cash build-up shows a cautious attitude between less attractive investment opportunities,” the report said.
Interestingly, the previous spikes in cash holdings were pursued by rallies in large-cap indices like Nifty, even though the width of the overall market was weak.
Mutual funds bang in categories
In March 2025, the net flow in equity mutual funds slowed down to a 1 -year low. The total flow was ₹ 25,000 crore, below ₹ 29,000 crore in February and below ₹ 42,000 crore in October 2024.
The thematic and regional funds saw the biggest decline. In June 2024, in these categories fell in these categories in March, below 22,400 crores, in March.
Manufacturing funds saw outflow for the second consecutive month. Innovation, Quant, Infrastructure and Energy Funds also recorded their first redemption in two years, marking the largest outflow since the Kovid -19 era.
Middle and small cap flexible, large caps receive favor
Despite the market volatility, in March, the arrival of ₹ 4,100 crore continued to attract, 30% higher than an average of 1 year.
Mid-cap funds also remain stable.
Large-cap funds, which were out of the side for more than two years, have seen an improvement in income since August 2024.
A change in the NSE500 index weightage towards the top -50 shares suggests that large caps may dominate.
The report stated, “Elara Capital has highlighted that in 2010 and 2018, such index shifts were small and before bear markets in midcap, while big caps performed better.”
