Mutual Funds Invest ₹8,752 Crore in IPOs, Focusing on Small Caps

The mutual fund industry has significantly increased its investment in initial public offerings (IPOs), allocating over ₹8,752 crore in the quarter ending September 2025, according to a report by Ventura. This surge demonstrates a strategic focus on newly listed companies, primarily within the small-cap category, with only one company classified as mid-cap.

Investment patterns reveal a strong preference for smaller, scalable businesses that have the potential to generate superior long-term returns. Notably, mutual funds invested ₹2,754 crore in the IPO of Anthem Biosciences, followed by ₹1,272 crore in Aditya Infotech. Additionally, ₹253 crore was directed towards Brigade Hotel Ventures, further emphasizing the industry’s commitment to small-cap stocks.

Market Trends and Stock Movements

The report highlights that nine mid-cap stocks have the potential to transition into large-cap status according to the latest market capitalization list from AMFI (Association of Mutual Funds in India). These stocks include established names such as Muthoot Finance, HDFC AMC, Bosch, and Canara Bank.

In addition, six small-cap stocks are anticipated to be upgraded to mid-cap status following AMFI’s recent adjustments. The companies identified for this potential upgrade include Cohance Lifesciences, Endurance Technologies, Apar Industries, Poonawalla Fincorp, Gland Pharma, and Delhivery.

The report also provides a broader view of the mutual fund landscape in India. For the September 2025 quarter, equity schemes experienced inflows of ₹1,06,554 crore, a notable increase from ₹66,869 crore in the previous quarter. In contrast, debt schemes faced an outflow of ₹3,156 crore, compared to inflows of ₹2,01,516 crore in the preceding quarter.

Changing Dynamics in Fund Categories

Hybrid schemes saw inflows of ₹45,570 crore in the September quarter, following an inflow of ₹58,235 crore in the previous quarter. Monthly systematic investment plan (SIP) contributions reached an all-time high of ₹29,361 crore by the end of September 2025, up from ₹27,269 crore in June 2025.

Despite the positive trends in overall equity inflows, small-cap and mid-cap categories experienced a sharp decline in assets under management (AUM) growth. Small-cap and mid-cap indices saw growth rates plummet from 20% and 17% in the previous quarter to just 0.6% and 0.4%, respectively. This shift results from a broader market correction affecting these segments, while the Nifty 50 index recorded only a modest gain.

In terms of performance, multi-cap and flexi-cap funds showed the most significant changes in AUM, each reflecting around a 2% increase during the same period. Conversely, equity-linked savings schemes (ELSS) reported a decline of 3.5% in AUM.

As the mutual fund industry continues to navigate the complexities of the market, its strategic focus on small-cap investments indicates a belief in their growth potential, despite recent volatility. Investors will be watching closely to see how these trends develop in the coming quarters.