Large Cap’s five-year decline – a structural re-rating of where Indian investors want their money

Large Cap’s share of total equity AUM has fallen in a straight line – 18.2% (Mar-21) → 16.6% (Mar-22) → 15.5% (Mar-23) → 13.4% (Mar-24) → 12.2% (Mar-25) → 11.4% (Mar-26). In absolute rupees, Large Cap AUM grew from ₹1,78,324 Cr to ₹3,66,045 Cr, so money didn’t leave – it just barely doubled while total equity AUM more than tripled (₹9,79,367 Cr to ₹31,97,698 Cr). Every other category’s share in the overall pie grew faster.

The ratio shift against Mid and Small Cap is the most striking way to visualise this. In March 2021, Mid Cap was just 0.65x the size of Large Cap, and Small Cap at a distant 0.39x. By March 2026, Mid Cap has crossed over at 1.14x Large Cap – bigger than Large Cap for the first time – and Small Cap has reached 0.91x, closing in fast. Year by year, this progression is relentless:

Trend 2:

Sectoral/Thematic: Five years of dominance, one extraordinary year, and a sharp correction

Sectoral/Thematic AUM has grown nearly 5x from ₹98,080 Cr (Mar-21) to ₹4,77,309 Cr (Mar-26), with equity AUM share rising from 10.0% to 14.9% — a story of genuine secular growth. But the flow data tells a more nuanced story.

The annual flows: FY22: ₹27,128 Cr (16.5%) → FY23: ₹23,731 Cr (16.2%) → FY24: ₹46,138 Cr (25.1%) → FY25: ₹1,46,656 Cr (35.2%) → FY26: ₹29,975 Cr (8.6%). FY25 was the outlier — more than one rupee in every three going into equity mutual funds chose a sectoral or thematic fund. Three forces converged: India’s capex Supercycle gave credible narratives for infrastructure, defence and manufacturing launches; PSU re-rating attracted fresh money; and crucially, unlike most equity categories where SEBI permits only one scheme per fund house, there is no limit on sectoral and thematic fund launches.

FY26’s pullback to 8.6% of flows is the market’s verdict. Defence, PSU and manufacturing themes underperformed as valuations stretched and earnings upcycles disappointed. Redemptions followed losses. FY25 was a powerful reminder that NFO-driven surges built on narratives and not on earnings do reverse.

Trend 3:

Multi Asset Allocation Funds (MAAFs): From niche to essential, fuelled by gold and silver’s historic run

Multi Asset Allocation Fund (MAAFs) has been the single biggest structural winner in the entire hybrid segment over five years: from ₹14,795 Cr (Mar-21) to ₹26,591 Cr (Mar-23), and then an explosion to ₹1,73,762 Cr by Mar-26. Its share of hybrid AUM has surged from 4.1% (Mar-21) to 16.8% (Mar-26) — the largest positive shift of any hybrid sub-category. Net inflows tell the same story: FY22: ₹1,498 Cr → FY23: ₹6,070 Cr → FY24: ₹33,054 Cr → FY25: ₹34,786 Cr → FY26: ₹65,209 Cr.

The fuel for the growth of this category has been precious metals. Gold rose 21% in value in 2024 alone in INR terms, before surging a further ~55% in 2025. Because SEBI mandates MAAFs invest at least 10% each in equities, debt and commodities, these funds had built-in exposure to the precious metals rally. When equity markets struggled in late 2024 and 2025, the gold and silver allocation cushioned returns and made MAAFs standout performers. Multi-asset funds delivered an average return of 17.4% in 2025, even as equity markets struggled. Flows followed performance, and the changes in debt fund taxation in 2023 and 2024 removed indexation benefits, pushing investors toward alternatives — multi-asset funds quietly filled this gap.

TREND 4:

Overseas FOF: fighting regulatory handcuffs to capture a global market recovery

The story of overseas Fund of Funds in India is as much about regulation as it is about returns.

The AUM journey: ₹12,408 Cr (Mar-21) → ₹22,609 Cr (Mar-22) → ₹22,991 Cr (Mar-23) → ₹25,713 Cr (Mar-24) → ₹25,031 Cr (Mar-25) → ₹38,287 Cr (Mar-26). The flat line from Mar-22 to Mar-25 is not investor disinterest — it is the direct consequence of a regulatory wall. In January 2022, SEBI restricted mutual funds from accepting new investments in international funds as the industry breached the USD 7 billion limit. By April 2024, the USD 1 billion cap for overseas ETFs was also reached, leading to a complete ban on fresh inflows — no new lump-sum investments or SIPs permitted in most overseas equity schemes unless redemptions created room within the caps.

The flow data shows exactly what happened. FY22 saw strong inflows of ₹10,674 Cr as investors rushed into global markets. Then the gates closed: FY23 flows dropped to just ₹1,639 Cr, FY24 saw net outflows of ₹3,143 Cr, and FY25 was still negative at ₹2,065 Cr. Investors who wanted global exposure had essentially nowhere to go through the mutual fund route. Around 70 schemes in India focus on overseas investing, but their ability to accept new investments is constrained by industry-wide limits.

FY26 marks the first meaningful recovery: ₹4,826 Cr of net inflows, with acceleration clearly visible in monthly data — flows went from near-zero in the first half of FY26 (Apr–Jun 2025) to ₹962 Cr in September, ₹882 Cr in January 2026, and ₹904 Cr in February 2026. The trigger is performance, as the global and emerging market equity indices started recovering strongly — providing exactly the return differentiation that makes overseas diversification compelling for Indian investors. The AUM jumped from ₹25,031 Cr (Mar-25) to ₹38,287 Cr (Mar-26) in a single year — a 53% increase.

TREND 5:

SIP Book: A decade of compounding discipline, now crossing ₹32,000 Cr a month

March 2026 marked a watershed moment for Indian mutual funds: monthly SIP inflows crossed ₹32,087 Crore for the first time, setting an all-time high. This is not a one-month spike — it is the culmination of a decade-long structural shift in how India saves. Total SIP inflows for FY 2025-26 stand at ₹3,49,589 Crore — up 21% over FY25’s ₹2,89,352 Crore, and more than 8x the ₹43,921 Crore collected just ten years ago in FY 2016-17. The compounding of the SIP book itself has become one of Indian finance’s most reliable data stories.

The growth trajectory across fiscal years tells a clean story of acceleration: FY17: ₹43,921 Cr → FY18: ₹67,190 Cr → FY19: ₹92,693 Cr → FY20: ₹1,00,084 Cr → FY21: ₹96,080 Cr → FY22: ₹1,24,566 Cr → FY23: ₹1,55,972 Cr → FY24: ₹1,99,219 Cr → FY25: ₹2,89,352 Cr → FY26: ₹3,49,589 Cr. The only blip was FY21, when COVID disrupted household cash flows and many investors paused mandates. Every other year has been higher than the previous one.

The monthly data within FY26 is equally striking. April 2025 opened at ₹26,632 Cr — already higher than any single month before FY24. By September, inflows had crossed ₹29,000 Cr. December ’25 and January ’26 both touched ₹31,000 Cr. And March 2026 delivered the milestone: ₹32,087 Crore, the highest monthly SIP collection in the history of the Indian mutual fund industry. This was not driven by a single market event or an NFO surge — it reflects the quiet, persistent expansion of the SIP register, with new SIP registrations consistently outpacing discontinuations through FY26.

What makes this growth durable is its source. SIPs are not lump-sum market calls — they are standing instructions, auto-debited from bank accounts, renewed by inertia as much as by conviction. Once registered, most investors stay in. The expanding SIP book means the industry now enters every month with a guaranteed base of inflows that is structurally larger than the month before. At ₹32,000 Crore a month, the SIP run-rate alone exceeds the total equity inflows the industry used to see in an entire year as recently as FY17. India has built a savings machine — and it keeps getting larger.

The growth trajectory across fiscal years tells a clean story of acceleration: FY17: ₹43,921 Cr → FY18: ₹67,190 Cr → FY19: ₹92,693 Cr → FY20: ₹1,00,084 Cr → FY21: ₹96,080 Cr → FY22: ₹1,24,566 Cr → FY23: ₹1,55,972 Cr → FY24: ₹1,99,219 Cr → FY25: ₹2,89,352 Cr → FY26: ₹3,49,589 Cr. The only blip was FY21, when COVID disrupted household cash flows and many investors paused mandates. Every other year has been higher than the previous one.

The monthly data within FY26 is equally striking. April 2025 opened at ₹26,632 Cr — already higher than any single month before FY24. By September, inflows had crossed ₹29,000 Cr. December ’25 and January ’26 both touched ₹31,000 Cr. And March 2026 delivered the milestone: ₹32,087 Crore, the highest monthly SIP collection in the history of the Indian mutual fund industry. This was not driven by a single market event or an NFO surge — it reflects the quiet, persistent expansion of the SIP register, with new SIP registrations consistently outpacing discontinuations through FY26.

What makes this growth durable is its source. SIPs are not lump-sum market calls — they are standing instructions, auto-debited from bank accounts, renewed by inertia as much as by conviction. Once registered, most investors stay in. The expanding SIP book means the industry now enters every month with a guaranteed base of inflows that is structurally larger than the month before. At ₹32,000 Crore a month, the SIP run-rate alone exceeds the total equity inflows the industry used to see in an entire year as recently as FY17. India has built a savings machine — and it keeps getting larger.

TREND 6:

Market Share Shift — who gained, who lost, and what it says about where investors are moving their money

Total equity AUM more than doubled from ₹15,17,082 Crore in March 2023 to ₹31,97,698 Crore by March 2026 — a ₹16.8 lakh Crore expansion in three years. image.png

But this growth was deeply uneven across categories. Of the eleven equity sub-categories tracked by

AMFI, six gained market share, and five lost it. The divergence is not noise — it reflects a structural reallocation of investor preference that has been building since FY22 and is now clearly legible in the data.

The gainers: risk appetite moving up the curve. Sectoral and Thematic funds were the single biggest winners in equity, gaining 3.5 percentage points (pp) of share to reach 14.9% of equity AUM. Mid Cap (+1.0pp), Small Cap (+1.7pp), Multi Cap (+1.9pp), and Large & Mid Cap (+1.0pp) all gained ground — a consistent pattern of investors moving away from pure large-cap safety and toward higher-risk, higher-return mandates. Net inflows into these categories were substantial and deliberate: Mid Cap saw ₹1,10,898 Crore of net inflows over the period, Small Cap’s net inflows stood at ₹1,29,901 Crore. Crucially, in Mid Cap, 68% of the AUM growth came from mark-to-market appreciation — meaning investors who came in were rewarded, which in turn attracted more.

The losers: structural headwinds, not temporary underperformance. Large Cap lost 4.1 percentage points of equity AUM share — the steepest decline of any category — falling from 15.5% to 11.4%. This is not because Large Cap AUM shrank: it grew from ₹2,35,760 Crore to ₹3,66,045 Crore in absolute terms. But it grew far slower than the rest of the market. A significant reason is the persistent return gap: Large Cap funds as a category have struggled to beat their benchmark net of fees, making the case for passive alternatives increasingly compelling for the large-cap allocation. ELSS lost 3.2 percentage points, falling from 10.0% to 6.8% — a predictable consequence of the new tax regime removing the Section 80C deduction advantage that was historically the primary reason investors chose ELSS over other equity funds. Focused Fund shed 1.6 percentage points, reflecting lower new launches and investor preference for broader diversification mandates.

In a hybrid, the story is Multi-Asset Allocation’s dominance. Multi Asset Allocation Fund gained 11.2 percentage points of hybrid AUM share — from 5.6% to 16.8% — making it the single largest share shift of any category across both equity and hybrid segments. ₹1,28,309 Crore of net inflows in three years, against a base of just ₹26,591 Crore, tells you this was genuine new allocation, not just market appreciation. On the other side, the traditional hybrid anchors gave ground: Balanced / Aggressive Hybrid lost 9.7 percentage points, and Dynamic Asset Allocation / Balanced Advantage lost 11.2 percentage points — both categories that had been the default “one-stop” solution for moderate-risk investors, now facing competition from Multi Asset funds that offer a more complete, gold-inclusive mandate. Arbitrage Fund grew sharply in share (from 14.1% to 24.5%), but this is driven almost entirely by short-term institutional and HNI parking of money around tax-efficient liquid alternatives, not by retail conviction. Its MTM effect was negative at -₹14,460 Crore, confirming that the AUM growth is purely flow-driven.

The MTM data adds a further dimension to reading these share shifts. A high % Effect — the proportion of AUM growth coming from market returns rather than net inflows — tells you a category is being held more than it is being bought fresh. Mid Cap’s 68% MTM effect and Large Cap’s 36% MTM effect sit at opposite ends of this spectrum: Mid Cap investors were rewarded handsomely and stayed; Large Cap investors received less appreciation relative to the broader market, and many chose to redeploy elsewhere. The share shift is therefore not just a story about new money — it is also a story about where existing investors decided to stay.

(The author is Viraj Gandhi, CEO of Samco Mutual Fund)