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February’s mutual fund flows highlight a strategic shift in investor behavior, balancing growth opportunities with risk mitigation amid global uncertainty. Equity mutual funds saw inflows of ?29,303.34 crore, though lower than January’s ?39,000+ crore, reflecting profit-booking after a strong rally and cautious investing post-budget. Within equities, sectoral/thematic funds (?5,711.58 crore) continued to dominate, as investors bet on policy-driven themes like infrastructure, defense, and digital transformation. Small-cap funds (?3,722.46 crore) remained attractive, but concerns over stretched valuations and SEBI’s cautionary stance may temper this trend in coming months.

Debt mutual funds recorded outflows of ?6,525.56 crore, largely due to institutional withdrawals amid quarter-end liquidity needs and shifting rate expectations. However, liquid funds gained ?4,976.97 crore, as corporates temporarily parked surplus cash before redeploying it in March. The growing preference for hybrid funds (?6,803.85 crore inflows), particularly arbitrage funds, signals investors seeking stable returns amid market volatility.

Gold ETFs saw a massive ?1,979.84 crore inflow, as investors turned to gold’s safe-haven appeal amid geopolitical tensions and record-high prices. Meanwhile, passive investing (?8,023.12 crore inflows into index funds & ETFs) gained traction, driven by cost-conscious institutions reducing active risk exposure. SIP flows hit ?26,400 crore, reaffirming the resilience of retail investors in long-term wealth creation. Overall, investors are tactically diversifying, balancing risk and reward amid evolving global and domestic economic conditions.