Four equity mutual fund categories \u2014 large-cap, dividend yield, value, and ELSS funds \u2014 witnessed net outflows in July 2026, even as most delivered positive returns during the month.<\/p>\n
While large-cap and value funds slipped into outflow territory after seeing inflows in June, dividend-yield and ELSS funds continued to see withdrawals.<\/p>\n
What drove this trend, and should investors be concerned? Here\u2019s what experts have to say on this.<\/p>\n
Source: AMFI; Negative figures indicate net outflows, while positive figures indicate net inflows.<\/p>\n
Jasmeet Singh, Executive Director, Anand Rathi Wealth, attributed the outflows across these large-cap-oriented categories to a shift towards broader market segments.<\/p>\n
\u201cIt is mainly due to investors' shift towards broader segments such as mid- and small-caps as markets recovered and valuations became more reasonable following the recent corrections,\u201d he noted. This also reflects a recurring recency bias, where investors favour segments that have performed well recently.<\/p>\n
Aditya Agarwal, Co-Founder, Wealthy.in, also attributed the large-cap outflows to stronger investor preference for mid- and small-cap funds, while value\/contra funds faced weaker near-term demand despite their long-term appeal.<\/p>\n
\u201cDividend-yield funds saw limited appetite for defensive strategies, while ELSS outflows reflected post-tax-season redemptions and its three-year lock-in,\u201d Agarwal added.<\/p>\n
For ELSS, Singh pointed to the growing preference for the new tax regime, which reduces the relevance of Section 80C-linked investments. At the same time, existing investors continue to redeem units as their lock-in periods end, keeping outflows elevated.<\/p>\n
Not necessarily. Large-cap funds delivered average returns of 2.4% in July 2026, up from 1.9% in June 2026. Dividend-yield funds improved to 1.9% from 1.1%, while value funds moderated to 1.4% in July from 1.9% in June, according to Singh.<\/p>\n
\u201cFund flows and returns do not necessarily move together,\u201d he noted. The stronger July returns in large-caps, despite outflows, suggest that investors were more likely driven by rebalancing towards mid- and small-caps than exiting because of poor performance.<\/p>\n
Agarwal pointed out that value and dividend-yield funds delivered positive returns, while ELSS recorded category-average one-month returns of around 0.5%. This indicates that relative performance and investor preference played a larger role than negative returns.<\/p>\n
Experts caution against treating one month of outflows as a signal to exit a category.<\/p>\n
Agarwal explained that large-cap, value and dividend-yield funds serve different roles in a diversified portfolio, while ELSS is primarily a tax-saving product with a three-year lock-in.<\/p>\n
\u201cJuly\u2019s data indicate that investors were reallocating towards segments that had delivered stronger recent performance, particularly mid- and small-cap funds,\u201d he added.<\/p>\n