Lots of SIPs to mop up stocks

The stock markets were down in March 2026 due to the Iran war. Between the end of February and end of March, the Sensex lost 9,000 points, or more than 11 per cent, before it recovered almost 5,000 points in April. Yet, according to data, equity mutual funds attracted massive net inflows of more than INR 40,000 crore in March, a sharp jump from around INR 26,000 crore in February, which too saw the index down by 1,000 points or so. In retrospect, one can cite several reasons for this seemingly-unreasonable behaviour but it still belies reason.

If this was not enough, look at what happened to SIPs, or systematic investment plans that can entail a regular monthly investment of INR 500 in mutual funds. According to the figures by the Association of Mutual Funds in India (AMFI), the net inflows through it went up to more than INR 32,000 crore in March 2026, up from nearly INR 30,000 crore in the previous month of February. While this seems confounding, the number of outstanding SIPs came down in March, as the monthly cancellations or de-registrations outnumbered new accounts, whose numbers came down dramatically by a fifth within a month.

What is confusing is that in both the cases, equity mutual funds and SIPs, the overall assets under management (AUM) were down. The AUM for SIPs were down by INR 20,000 crore, and that for equity mutual funds declined by more than INR 8,00,000 crore between the two months. Hence, while the monthly inflows were up, the overall figures were down. The trends need an explanation, or an insightful analysis about what the investors are doing, and how they are thinking about stocks. The mindset of retail investors seems to diverge.

Normally, when the markets are down, the scared and frightened retail investors run amok, and get out of stocks, whatever may be the price that they get. They become sellers, as they seek safety in cash or fixed-return instruments that are secure, and carry less risk. This is exactly what happened in 2008 during the Great Recession, and Covid crisis. Even the institutions may follow the same practices, although they are generally faster to come back to the markets. But retail investors increasing their exposures or inflows marks a change in trends.

Let us begin with SIPs, which offer better insights into the minds of the small investors because of the nature of the instrument. Even though the number of SIP accounts declined in March, the net inflows indicate that those who continued with their accounts, and newcomers increased their monthly amounts, or invested additional lump-sum amounts. Hence, the new account additions in March were just a fifth of the numbers in February, the possibilities of higher amounts or lump-sums seem justified. Some ran away but others were brave. The latter put the fears aside, and took higher risks for several reasons.

Market corrections triggered by geopolitical shocks encouraged the existing investors to increase allocations. Many retail investors are now smart and savvy, and based on past experiences, have realised that the steep declines, which are temporary like wars, are entry opportunities rather than exit signals. During both the financial crisis of 2008, and pandemic, such small investors lost the chances to make huge profits, as they went helter-skelter, away from stocks, only to see their shares, and indices bounce back rapidly and majestically. This time though, many of the war and Covid-scarred ones stayed put.

As far as the AUMs are concerned, the dip is self-explanatory. As the indices tumbled, and stocks took a beating, despite the inflows, the market values of the mutual funds’ holdings declined. Since they need to immediately resort to mark-to-market, and adjust AUMs as per the current prices, the values took a logical dip. One needs to figure out if the managers of the mutual funds decided to stay put, or increase their exposures to stocks, rather than quietly cash out from shares where they had earned handsome returns, and wait to buy at the lows.

Anand Vardarajan, Chief Business Officer, Tata Asset Management, noted, “It was heartening to see nearly INR 40,500 crore in the equity (mutual fund) category, and investors used the market fall in March to increase their equity allocations. As FY26 comes to a close we have seen some major shifts in flows. Flexi-cap saw the highest inflow for the month and for the year. Midcap and small-cap were close next.” Thus, the retail investors showed confidence in stocks, even though the prices were down, and indices were hammered through March.

Pankaj Shrestha, Head of Investment Services, PL Wealth Management, said, “The strong net equity inflow of INR 40,450 crore in March, despite it being one of the most volatile months in the near term, reflects robust investor conviction in the long-term equity story. Rather than being deterred by short-term fluctuations, investors used the opportunity to increase their equity allocations. The record SIP inflow… reflects growing investor discipline, and a clear shift towards systematic investing.” In essence, small investors are more disciplined, and habitual when it comes to SIPs, even if some are scared.

The data further underscores the growing importance of domestic investors in stabilising Indian markets, especially when the foreign investors pulled out funds amid global uncertainties. Karthick Jonagadla, founder and CEO, Quantace Research, said, “March 2026 AMFI data strengthens the Indian constructive case: Households treated global stress as a buying opportunity, not a signal to retreat. From an Indian market perspective, domestic savings are no longer just supportive liquidity; they are an active shock absorber. That does not remove macro risk, but it does mean external volatility is increasingly being met by a deeper, steadier domestic bid.”

A closer look at the flow trends reveals a strong preference for diversified and growth-oriented categories. Flexi-cap funds emerged as the top category, followed closely by mid- and small-cap funds, indicating that investors are willing to take calibrated risks for higher long-term returns. Normally, the small-caps and midcaps are the stocks that face the worst battering due downturns and corrections. As Vardarajan highlighted, hybrid categories saw selective flows, with investors gravitating towards multi-asset strategies for diversification, while arbitrage and debt funds faced pressure.

Overall, March’s data reinforces a key trend: Indian retail investors are no longer passive participants but active, disciplined allocators of capital, capable of absorbing global shocks and sustaining market momentum through consistent inflows.