Market turbulence drives investors to play it safe with flexicap bets

Mumbai: Retail investors' confusion over where to invest in a wobbly stock market is increasingly prompting them to delegate allocation decisions to fund managers. Flexicap funds, which give fund managers the flexibility to invest in large, mid or small-cap stocks based on their outlook for the market, garnered the highest flows in 2025, a reflection of investors' lower confidence in specific share categories such as small or mid-caps delivering steady returns in a narrowing stock market. This category garnered ₹80,979 crore in 2025 compared to ₹40,962 crore in 2024. Multi-asset funds garnered ₹47,056 crore in 2025, up from ₹42,568 crore in the previous year. Flows into thematic and sectoral funds, which have fallen out of favour, fell from ₹1.55 lakh crore to ₹38,144 crore in the same period. Small-cap funds attracted inflows of ₹52,321 crore in 2025, up from ₹32,223 crore in 2024. Mid-cap funds saw inflows rise to ₹49,939 crore, compared with ₹34,303 crore a year earlier. 'In an uncertain world with worries of tariffs, geopolitical uncertainty and rich valuations, investors who want equity allocation like to play it safe and allocate money to flexible mandates," says Nikhil Gupta, founder, Sage Capital.126494646 The shift in flows from the riskier thematic and sectoral funds to flexicap schemes in 2025 highlights growing retail unease with concentrated bets in a narrowing and volatile market. Though the confidence in the market in small- and mid-cap segments has waned since 2024, these schemes continued to receive flows as investors remained enamoured by their superior returns in the previous four years. "In 2024, it was thematic funds that saw high inflows because of a significant amount of chasing returns, and allocations had limited alignment to the risk profile of the investor. These investors have not had the optimum experience there. Some of them saw more merit in broader categories like flexicap," says Suranjana Borathakur, head of distribution and strategic alliances, Mirae Asset Mutual Fund. While the Nifty 50 returned 10.5%, the Nifty Midcap 150 gained 5.4%, even as the Nifty Smallcap 250 fell 6% and the Nifty Microcap 250 declined 10.1%, making it challenging for most retail investors to generate returns. With valuations stretched and broad-based gains elusive, the market is increasingly shaping up as a stock-picker's market going ahead. "With mid and small-cap valuations expensive, investors believe a broader flexicap mandate allocation makes more sense," said Borathakur. Most equity fund categories operate under rigid allocation mandates. Large-cap funds must invest at least 80% of their corpus in the top 100 stocks by market capitalisation, while mid-cap funds are required to deploy a minimum of 65% in stocks ranked 101-250. Multi-cap funds, meanwhile, must allocate at least 25% each to large, mid- and small-cap stocks. Flexicap funds are the only category that gives fund managers full discretion to shift allocations based on their market outlook.