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The Mutual Fund Market in March 2025: Recovery and Challenges
### Fund Flows
#### Key Trends
• Debt fund redemptions were at a record high of ₹2,02,663 Crore in March 2025. • Equity fund inflows were at a 11-month low of ₹25,082 Crore. • Hybrid funds saw outflows after a very long time in March 2025. • Passive funds, on the other hand, saw significant inflows, with index funds and index ETFs driving the growth. #### Debt Fund Flows
• Liquid Funds, Overnight Funds, Money Market Funds, and Ultra Short Duration Funds were the biggest contributors to debt fund outflows. • Debt fund outflows continued to be concentrated at the short end of the yield curve. • Debt fund outflows were largely driven by the pressure to redeem debt instruments at the end of the quarter. #### Equity Fund Flows
• Equity fund inflows were at a 11-month low of ₹25,082 Crore. • Multi-Cap/Flexi-Cap Funds, Small Cap Funds, Mid-Cap Funds, Large & Mid-Cap Funds, Large Cap Funds, and Value Funds were the top contributors to equity fund inflows. • Equity fund inflows were lower than expected, but still significant. • Sectoral funds were out of favor in March 2025. #### Hybrid Fund Flows
• Hybrid funds saw outflows after a very long time in March 2025. • Multi-Asset Allocation Funds were the only exception, with net inflows of ₹1,670 Crore. • Arbitrage Funds saw net outflows of ₹2,855 Crore, largely due to treasury redemptions by corporates. • Hybrid fund outflows were largely driven by the pressure to redeem hybrid instruments. #### Passive Fund Flows
• Passive funds saw significant inflows, with index funds and index ETFs driving the growth. • Index funds saw inflows of ₹3,501 Crore, and index ETFs saw inflows of ₹10,962 Crore. • Gold fund flows tapered at higher levels. • Passive fund inflows were sharply higher than in February 2025. ### Asset Under Management (AUM)
#### AUM Mix
| Fund Category | March 2025 AUM (₹ Crore) |
| — | — |
| Active Debt Funds | 15,21,000 |
| Alternate Debt Funds | 2,85,000 |
| Active Equity Funds | 29,45,000 |
| Alternate Equity Funds | 5,00,000 |
| Hybrid Funds | 1,11,000 |
| Passive Funds | 30,03,000 |
| Other Funds | 5,00,000 |
#### AUM Growth
• Mutual funds reported a 1.88% sequential increase in AUM in March 2025. • Active debt funds saw a sharp decline in AUM due to negative flows in the quarter-end. • Equity fund AUM jumped to ₹29,45,000 Crore in March 2025 from ₹27,40,000 Crore last month. • Alternate AUM improved by 22.3% on a year-over-year basis. ### Key Takeaways
• Mutual funds saw a mixed picture in March 2025, with heavy debt fund redemptions offset by the revival in equity markets. • Hybrid funds saw outflows after a very long time, while sectoral funds were out of favor in March 2025. • Mutual funds reported a 1.88% sequential increase in AUM in March 2025, despite heavy debt fund redemptions. ### Challenges Ahead
• Debt fund outflows continued to be a challenge, with liquid funds, overnight funds, money market funds, and ultra short duration funds being the biggest contributors. • Passive funds faced challenges in maintaining their inflow momentum, despite seeing significant growth in March 2025. • Hybrid funds need to address the outflow issue, while sectoral funds need to regain popularity.