Eternal (formerly Zomato) emerged as mutual funds' top pick in August, attracting ₹7,200 crore, surpassing giants like Infosys and HDFC Bank. Several AMCs, including Aditya Birla Sun Life and Axis Mutual Fund, significantly added the stock, while SBI Mutual Fund reduced its holdings. Overall, equity mutual funds decreased cash balances, deploying funds into opportunities like Eternal's Ant Block deal.

Mutual fund cash holdings dropped to a nine-month low of 4.99% in August, down from 5.17% in December 2024, with overall cash at Rs 1.98 lakh crore. However, some fund houses raised their cash levels. PPFAS Mutual Fund increased its cash holdings to 22.33% from 21.36%, while Kotak Mutual Fund raised its share to 3.29% from 2.17%.

Largecap mutual funds experienced a significant surge in monthly inflows, rising by 33% to ₹2,834 crore in August, signaling a potential shift towards safety among investors amid concerns about slowing revenue and profit growth.

Flexi cap mutual funds are gaining popularity among investors. Their assets are nearing Rupees 5 lakh crore in August. This shows strong investor confidence. These funds offer flexibility in allocating investments across different market caps. Flexi cap funds received Rupees 7,679 crore in inflows in August. Investors are advised to consider these funds as a core portfolio holding.

Equity mutual funds mostly gave negative returns in the last year. ETMutualFunds analysis reveals that 74% of funds underperformed on lumpsum investments. Samco Flexi Cap Fund saw the biggest loss. Motilal Oswal Multi Cap Fund gave the highest return. Investors should consider their risk tolerance before making any decisions. The analysis excludes sectoral and thematic funds.

Swiggy and Dixon Technologies may be upgraded to large-cap, while HDB Financial Services could enter the midcap segment in AMFI’s February 2026 recategorisation, according to Navuma. Around 30 stocks, including NSDL and Vikram Solar, may move to smallcap, with new thresholds set for large- and mid-cap classifications.

Sectoral and thematic mutual funds witnessed a sharp 59% decline in inflows in August, primarily due to reduced NFO contributions and increased profit-booking by investors. Experts suggest a shift towards diversified equity categories like large-cap and flexi-cap funds, offering more stable performance amid market volatility.