Inflows into India's equity mutual funds shrank to a 10-month low in February as the benchmark index posting its longest falling streak in nearly three decades pushed away investors, data released on Wednesday showed.

The sharp decline was largely attributed to reduced inflows in mid and small-cap funds, which saw a drop to Rs 3,406 crore and Rs 3,722 crore in February.

In February, mutual fund net inflows dropped by 79% due to a 5% decline in benchmark indices Nifty 50 and BSE Sensex. Equity mutual fund inflows fell by 26%. Sectoral and thematic funds received the highest inflows,

This was the second consecutive month of decline in inflow in equity funds. The latest fund infusion by investors also marks the 47th consecutive month of net inflows into the segment

Equity mutual funds increase cash holdings amid market volatility, preparing to capitalize on emerging investment opportunities.

As of January 31, 2025, Parag Parikh Flexi Cap Fund has allocated 61.5% of its assets in large caps, 2.6% in mid caps, 2.6% in small caps, 13.7% in overseas equities, 10% in debt instruments, and the balance in cash. Its top stock holdings comprise HDFC Bank, Bajaj Holdings & Investment, Power Grid Corporation of India, Coal India, and ITC.

Equity Mutual funds are beneficial for long-term financial goals, leveraging the compounding effect. Despite market volatility, they can offer opportunities to buy at lower prices