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 Inflows into India's equity mutual funds fell in November, while investors continued to prefer small- and mid-cap funds on hopes of strong returns, data from the Association of Mutual Funds in India (AMFI) showed on Friday.

The inflows dropped 22.15% month-on-month to 155.36 billion rupees in November from 199.57 billion rupees in October, the data showed.

This is the 33rd consecutive month of inflows on a net basis.

"Diwali festivities and bank holidays probably affected equity net flows in November," said Manish Mehta, head of sales, marketing and digital business at Kotak Mutual Fund.

Mutual fund inflows in equity-oriented schemes were at 1.45 trillion rupees, so far this year, propelling the benchmark indexes Nifty 50, BSE Sensex as well as the more domestically focussed small- and mid-caps to fresh all-time highs.

The benchmark Nifty 50 gained 5.52% in November, its best month since July 2022, aided by favourable liquidity conditions, easing global rate concerns and strong macroeconomic data.

Contributions into systematic investment plans (SIPs) - in which investors make regular payments into mutual funds - hit a record of 170.73 billion rupees in November, with the number of SIP accounts rising by 1.41 million to 74.41 million, also an all-time high.

Small-cap funds accounted for most of the investments for the 14th straight month at 36.99 billion rupees, about 12 times the inflows of 3.07 billion rupees into large-caps.

Mid-caps received inflows worth 26.66 billion rupees, compared with 24.09 billion rupees in October. Small- and mid-caps jumped 12% and 10.4%, respectively, in November, powered by retail inflows.

The small- and mid-cap indexes gained 48% and 40% so far this year, far outperforming a 15.5% gain in the benchmark Nifty 50 index.

Investors should be cautious about hiking allocations into small-caps, given the recent rally and stretched valuations, two analysts said.