In February 2026, equity mutual funds experienced inflows of approximately ₹26,000 crore, a decrease from ₹33,400 crore in August 2025 but an increase from ₹24,000 crore in January 2026. Flexi-cap funds were the most favored, attracting ₹7,000 crore. This category allows fund managers discretion over stock distribution, appealing to investors seeking flexibility. Conversely, equity-linked savings schemes (ELSS) are witnessing redemptions as many taxpayers shift to a new tax regime, reducing the attractiveness of tax benefits under Section 80C.

In the hybrid mutual fund space, multi-asset funds (MAFs) are gaining popularity, with inflows of ₹8,500 crore out of a total of ₹12,000 crore in February 2026, showcasing investor maturity in diversifying portfolios. The performance of MAFs is bolstered by their tax efficiency, as mutual funds do not incur capital gains taxes. Other hybrid categories like balanced advantage funds (BAFs) and arbitrage funds are also worth considering for their defensive strategies against market volatility.

Specialized investment funds (SIF) are emerging as a new investment avenue, with assets under management (AUM) nearing ₹10,000 crore, including ₹3,000 crore in February 2026 alone. This trend indicates that investors are exploring more defensive strategies that still offer potential upside. Overall, the current market dynamics suggest a shift towards more strategic investment choices among investors.