Hybrid mutual fund schemes witnessed a substantial Rs 1.55 lakh crore in inflows during FY26, reflecting a growing investor preference for diversified and balanced investment strategies amidst global market volatility and geopolitical tensions.
Illustration: Dominic Xavier/Rediff
Key Points
- Hybrid mutual funds attracted Rs 1.55 lakh crore in inflows during FY26, marking a 29 per cent increase from the previous fiscal year.
- The growth is attributed to investors seeking balanced and diversified investment solutions to cushion against market volatility and geopolitical uncertainties.
- Multi-asset allocation funds were a key driver of this growth, with their AUM increasing by over 65 per cent within the hybrid category.
- The number of hybrid fund folios rose to 1.9 crore in March 2026, adding 34 lakh investor accounts, reflecting a rising preference for diversified portfolios.
- Despite an increase in new fund offers (NFOs), investors largely preferred established hybrid funds with proven track records over newly launched schemes.
Hybrid mutual fund schemes attracted inflows of Rs 1.55 lakh crore in 2025-26, a 29 per cent increase over the preceding fiscal year, as investors increasingly turned to diversified investment strategies amid volatile market conditions.
The category witnessed strong traction despite heightened geopolitical tensions, including the conflict in West Asia, as investors sought balanced investment solutions that could cushion market volatility.
Why Hybrid Funds Gained Traction
“Hybrid funds saw strong traction in FY26 as investors looked for balanced investment solutions during volatile times.
“Multi asset allocation funds, in particular, gained popularity due to their ability to deliver relatively stable performance across market cycles,” Radhika Gupta, MD and CEO of Edelweiss Mutual Fund, told PTI.
According to data from the Association of Mutual Funds in India (AMFI), the number of hybrid fund folios rose to 1.9 crore in March 2026 from 1.56 crore a year earlier, adding 34 lakh investor accounts.
Assets under management (AUM) of hybrid schemes increased to Rs 10.35 lakh crore in March 2026 from Rs 8.83 lakh crore in March 2025, registering a growth of 17 per cent.
“The growth in AUM reflects rising investor preference for diversified portfolios and asset allocation-led investing.
“Hybrid funds have increasingly become a core allocation for investors seeking participation in equities with relatively moderated risk,” Gupta said.
Market Volatility and Investor Preference
Equity markets remained volatile during FY26 due to global uncertainties, including tariff concerns under US President Donald Trump, the ongoing Russia-Ukraine conflict and rising geopolitical tensions in West Asia.
During the same period, gold outperformed equities in the short-term, benefiting hybrid categories that maintained exposure to the precious metal.
“As a result, many hybrid funds were able to deliver relatively stable and higher near-term risk-adjusted performance compared to pure equity funds, which created recent bias in investors across this category,” Feroze Azeez, Joint CEO of Anand Rathi Wealth Ltd, said.
Additionally, investors increasingly preferred diversified and asset-allocation-based strategies to navigate uncertain market conditions, which further supported strong inflows into hybrid mutual funds during FY26, he added.
Rajesh Singla, CEO and Fund Manager at Alpha AMC, said hybrid funds gained traction as they offered downside protection through debt investments.
“The jump from Rs 1.2 lakh crore in FY25 to Rs 1.55 lakh crore in FY26 was not an accident, it was investors doing exactly what they should do when the world gets complicated,” he said.
“When geopolitical uncertainty drives oil above USD 100 and equity markets start swinging 2-3 per cent in a single session, pure equity funds feel uncomfortable.
Hybrid funds offer something that pure equity cannot — a built-in cushion,” Singla added.
Growth Drivers and Outlook
He noted that multi-asset allocation funds were a key driver of growth, while arbitrage funds also attracted significant flows due to their low-risk and tax-efficient nature.
“Between April 2025 and April 2026, the AUM of the broader hybrid category grew about 21 per cent, while multi-asset funds within the category witnessed growth of over 65 per cent,” Varun Gupta, CEO of Groww Mutual Fund, said.
“This trend suggests that investors are increasingly looking at diversification within the market, rather than avoiding the market altogether, as a way to navigate uncertain periods,” he added.
During FY26, 17 hybrid fund new fund offers (NFOs) were launched compared with 12 in the previous fiscal year.
However, cumulative inflows through these NFOs moderated to around Rs 4,106 crore from nearly Rs 4,792 crore in FY25.
“This indicates that while AMCs were aggressive in expanding new offerings, investors largely continued to prefer established hybrid funds with proven track records over newly launched schemes,” Azeez said.
On the outlook for the current financial year, Edelweiss MF’s Gupta said investor interest is likely to remain strong.
“The outlook for hybrid funds remains positive as categories like arbitrage, equity savings, balanced advantage, aggressive hybrid, and multi-asset allocation funds are well-suited for volatile market environments like the one we are witnessing today,” she said.
