Mutual Funds Surge in July, Favouring IT, PSU Banks, and Private Banking Names

Indian mutual funds saw an 80% MoM surge in inflows to ₹56,500 crore in July 2025, with core equity funds attracting ₹42,700 crore and thematic funds jumping to ₹9,400 crore. Mutual funds bought heavily into software services, PSU banks, and private banking names while paring holdings in aviation, cement, and certain commodity-linked sectors. Top buys included Software & Services, PSU Banks, and Private Banks.

Title: Indian Mutual Funds See Record Inflows in July 2025

Indian mutual funds experienced a significant 80% month-on-month (MoM) surge in inflows, reaching ₹56,500 crore in July 2025. This substantial increase was driven by robust inflows into core equity and thematic funds, with core equity funds attracting ₹42,700 crore and thematic funds jumping to ₹9,400 crore [1].

The surge in inflows was largely attributed to aggressive buying in software services, PSU banks, and private banking names, while holdings in aviation, cement, and certain commodity-linked sectors were reduced. The top buys included software services, PSU banks, and private banks [1].

Software services saw significant inflows, with ₹160,986 million worth of purchases, led by major IT companies like Infosys, TCS, HCL Tech, and Tech Mahindra. PSU banks also experienced substantial buying, with ₹113,499 million worth of net buying led by State Bank of India, Canara Bank, and Indian Bank. Private banks saw inflows of ₹103,314 million, with Axis Bank, Kotak Mahindra Bank, and ICICI Bank being the top picks [1].

Thematic funds, which focus on specific sectors or themes, saw a dramatic increase in inflows, jumping from ₹500 crore in June to ₹9,400 crore in July. These funds are designed to capitalize on emerging trends and growth opportunities in sectors like technology, infrastructure, and ESG (environmental, social, and governance) [1].

Equity NFOs (New Fund Offerings) also contributed significantly to the inflows, raising ₹10,880 crore, nearly 12 times higher than June's ₹930 crore. The major launches included HDFC Innovation Fund, ICICI Prudential Active Momentum Fund, Sundaram Multi-Factor Fund, TRUSTMF Multi Cap Fund, and Bajaj Finserv Small Cap Fund [3].

On the other hand, ELSS (Equity Linked Savings Scheme) funds recorded outflows, indicating a shift in investor preferences. Arbitrage funds saw a decrease in inflows, dropping from ₹15,600 crore in June to ₹7,300 crore in July [1].

Systematic Investment Plans (SIPs) also maintained their momentum, climbing to ₹28,500 crore in July, from June's levels. The total SIP AUM stood at ₹15.2 lakh crore, with outstanding SIP accounts reaching a record 94.5 million. The number of new SIP registrations rose to 6.9 million, while SIP closures hit 4.3 million [1].

The market context suggests that the Nifty PE (Price-to-Earnings ratio) is estimated to be 22.0x for FY26E and 19.1x for FY27E, with ROE (Return on Equity) expected to be 15.4% for FY26E and 16.3% for FY27E. Foreign investors pulled out $2 billion from the stock market in July due to lingering uncertainty about a U.S.-India trade deal and worries over weak earnings [2].

Overall, the July surge in mutual fund inflows signals strong retail and institutional participation, driven by new product launches and sustained SIP contributions. However, the high SIP closure rate suggests the need for greater investor discipline. Sector tilts show fund managers backing domestic growth themes like pharma, capital goods, and e-commerce, while staying cautious on private banks and IT [1].

References:
[1] https://www.business-standard.com/finance/personal-finance/mf-inflows-surge-80-in-july-to-5-65-lakh-cr-it-psu-banks-lead-buying-125081400834_1.html
[2] https://www.tradingview.com/news/reuters.com,2025:newsml_L4N3U30GQ:0-indian-equity-mf-inflows-soar-to-record-high-in-july/
[3] https://stocktwits.com/news-articles/markets/equity/equity-mutual-funds-register-record-inflows-in-july-driven-by-nfo-frenzy/chruujpRdIN