Equity Mutual Fund Redemptions (October 18): ₹1.25 Lakh Crore Pulled Out in the September Quarter, Up 19%

Equity mutual fund redemptions climbed sharply in the September quarter. Gross withdrawals from equity schemes rose 19% to ₹1.25 lakh crore, up from ₹1.05 lakh crore in the June quarter, The Hindu BusinessLine reported on October 18. Its read: early investors cashed out as prolonged global uncertainty clouded the domestic growth picture. And yet, on a net basis, more money still went into equity funds than came out. Both things are true at once, and that’s the interesting part.

Where the equity mutual fund redemptions came from

The selling wasn’t confined to one corner. Per BusinessLine, gross redemptions from small-cap funds rose 3% to ₹12,499 crore, from ₹12,106 crore in the June quarter. Mid-cap funds saw a bigger jump, up 14% to ₹12,544 crore from ₹10,966 crore. Hybrid schemes weren’t spared either: their gross redemptions rose 12% to ₹1.08 lakh crore from ₹96,199 crore. BusinessLine linked the hybrid pressure to an unfavourable rupee, which hurt debt markets, and to thinner arbitrage opportunities on the equity side.

The backdrop explains a lot. BusinessLine says the Nifty 50 ended the September quarter down about 5%, with most of the damage done in September alone, when the index fell about 6%, its worst September since 2018. The AMFI monthly note for September matches that: it puts the Nifty 50 Total Return Index down 6.0% for the month.

Net flows tell a calmer story

Gross redemptions are only one side of the ledger. AMFI’s numbers show equity schemes took in a net ₹38,307 crore in September, the 67th straight month of net inflows. August’s figure was ₹29,329 crore and July’s ₹24,697 crore. Add those up and the September quarter brought in about ₹92,333 crore net, slightly more than the roughly ₹90,321 crore of April to June (₹38,440 crore, ₹22,908 crore and ₹28,973 crore). Those quarterly totals are our own arithmetic on AMFI’s monthly data.

The segments that saw higher redemptions also drew the most fresh money. Small-cap funds pulled in a net ₹9,039 crore in September, up from ₹7,973 crore in August and ₹7,768 crore in July, AMFI data show. Mid-cap funds took ₹7,835 crore, against ₹6,989 crore and ₹6,192 crore in the two months before. So some investors were booking out while a larger group kept buying in, often through SIPs.

SIPs did the heavy lifting. Monthly SIP contributions hit ₹32,490 crore in September from 10.06 crore contributing accounts, according to AMFI, and Mint reported that this was a record. Hybrids were the weak spot: AMFI shows a net outflow of ₹457 crore from hybrid schemes in September, after ₹10,045 crore of net inflows in August.

What fund managers are saying

Rajesh Singla, CEO and fund manager at Alpha AMC, told BusinessLine that regular, rule-based SIP money gives equity funds a steady base even when sentiment is weak, though he added that stock selection matters more in small-caps than in large caps. Rishi Gupta of Shepherd’s Hill expects inflows to stay strong given low equity penetration, but said fund managers need to buy the right small-caps at reasonable prices.

What it means for the market

For listed stocks, net flows are what matter, because that’s the money fund managers actually deploy. In September, AMFI’s note says, foreign institutional investors sold ₹35,861 crore of equities while domestic institutions bought ₹76,030 crore. That pattern has carried into October, as we tracked in our FII and DII flows review for October. The rising redemptions are a reminder that this support isn’t one-way. If markets stay choppy, more early investors may cash out. For September’s full category data, see our earlier piece on mutual fund inflows in September 2026, and our guide to risk management if volatile weeks make you want to act fast. October’s AMFI data, due early next month, will show whether the pace of redemptions has picked up.

Disclaimer: This article is for information and education only and is not investment advice. Mutual fund investments are subject to market risks. Please do your own research or consult a SEBI-registered adviser before making any investment decision.