Indian Investors Shift to Large-Cap and Diversified Funds for 2025 Stability

Indian mutual fund investors are increasingly gravitating toward large-cap and diversified equity funds through systematic investment plans (SIPs) as they seek long-term stability and growth in 2025. Leading asset management companies, including ICICI Prudential and Kotak AMC, have emphasized the importance of such funds in portfolio construction, particularly with ICICI Prudential’s Nifty Next 50 Index Fund and other diversified offerings at the forefront [1]. These funds have attracted substantial assets under management, reflecting broad institutional confidence and a shift toward time-tested investment vehicles [2].

Despite the rising popularity of large-cap and diversified funds, mid-cap and small-cap mutual funds have also gained traction, particularly among younger investors. The Association of Mutual Funds in India (AMFI) reported a notable surge in inflows into mid-cap and small-cap funds in July 2025, indicating growing interest in high-growth segments of the market [3]. Top-performing mid-cap funds include the Axis Midcap Fund, PGIM India Midcap Opportunities Fund, and Invesco India Midcap Fund, all of which are being closely monitored for their ability to capitalize on emerging opportunities in this segment [1].

The momentum in mid-cap funds is further underscored by the performance of niche stocks held by specialized schemes. For example, a stock exclusively included in the Quant Multi Cap Fund (G) saw a 108% increase in FY26, reaching Rs 588 as of July 2025, with a market value of Rs 52 crore. This highlights the potential for concentrated bets in mid-cap stocks to deliver outsized returns, even in a volatile market [2].

The shift in investor behavior is also evident in the demographics of SIP participants. While the average monthly SIP contribution from investors under 30 remains at around Rs 1,000—18% lower than that of older investors—Gen Z’s participation is expected to drive long-term growth for mid-cap and small-cap funds [8]. Analysts attribute this trend to a change in risk preferences, with younger investors willing to take on higher volatility for the potential of superior returns [9].

The focus on traditional assets is not a deviation from the broader economic environment but rather a strategic move to balance risk and return. According to a recent analysis, the emphasis on large-cap and diversified equity investments reflects broader confidence in traditional assets despite ongoing market volatility [2]. Additionally, the absence of a direct impact on crypto markets underscores that institutional capital is flowing into more conventional and stable investment channels.

As mutual funds continue to reallocate assets, some mid-cap stocks are seeing increased investments, while others are being trimmed, indicating active portfolio management to align with market dynamics. This churning suggests a strategic approach to capturing growth opportunities amid shifting economic conditions [9].

Source:

[1] http://www.msn.com/en-in/money/markets/best-mid-cap-mutual-funds-to-invest-in-august-2025/ar-AA1JZmfx?apiversion=v2&batchservertelemetry=1&domshim=1&noservercache=1&noservertelemetry=1&renderwebcomponents=1&wcseo=1

[2] https://m.economictimes.com/markets/stocks/news/unique-picks-10-stocks-held-by-only-one-mf-scheme-in-july-5-surge-50-100-in-just-4-months/entertainment-network-india/slideshow/123299732.cms

[3] https://www.indiatoday.in/business/story/gen-z-mutual-fund-investing-risk-hungry-mid-cap-small-cap-sip-india-2770152-2025-08-13

[8] https://www.ndtvprofit.com/markets/phonepe-wealth-says-92-of-its-mutual-fund-investors-aged-under-30-invest-via-sips

[9] https://www.indiainfoline.com/blog/how-mfs-churned-large-caps-mid-caps-and-small-caps-in-july-2025