February data from the Association of Mutual Funds in India signals a rise in equity appetite. Funds investing in them saw an 8% bump-up in inflows from January to ₹25,977 crore, with mid- and small-cap funds in the lead; inflows into the former rose 26% and those in the latter surged 32%.
Flexi-cap funds, which are quite popular, saw inflows decline, though not by much. Debt and multi-asset funds also saw investor interest flag. On the whole, the preferred investment mix of retail investors seems to have shifted a bit, with high growth-potential stocks proving especially attractive.
Last month’s revival of flows into equity funds after January’s decline also suggests an easing of anxiety over a flat stock market. Valuations look more reasonable now that corporate earnings have had some time to catch up with prices.
But then, the latest fund inflow data doesn’t capture the impact of the Gulf war that began on 28 February. The oil shock that followed has raised uncertainty and rattled equities across markets and sectors. This could hit investor optimism in March, unless US President Donald Trump calls off hostilities to contain the global economic fallout of an energy squeeze.