The world of mutual funds is constantly evolving, and the third quarter of 2025 (ending September) has shown some exciting trends, particularly in their approach to Initial Public Offerings (IPOs). Let's break down how mutual funds strategically allocate capital and what that means for the market.
IPO Investment Surge: A Closer Look
- Significant Allocation: Mutual funds invested a whopping Rs 8,752 crore in recent IPOs during the September 2025 quarter. This highlights a strong appetite for new listings.
- Focus on Small Caps: A majority of these new investments were directed towards small-cap companies. Only one new entrant was categorised as a mid-cap.
- Why Small Caps? This strategy suggests mutual funds are looking for smaller, scalable businesses with high growth potential, aiming for superior long-term returns.
Key IPO Investments by Mutual Funds
- Anthem Biosciences IPO: Anthem Biosciences received the largest chunk of investment, with mutual funds allocating Rs 2,754 crore.
- Aditya Infotech: Following closely, Aditya Infotech saw investments of Rs 1,272 crore.
- Brigade Hotel Ventures: This small-cap stock attracted Rs 253 crore in mutual fund investments.
The Shifting Landscape: Mid-Cap and Small-Cap Upgrades
The market is dynamic, and companies often move between market capitalisation categories. Here's what the report indicates for potential upgrades:
- Mid-Caps Eyeing Large-Cap Status: Nine stocks currently enjoying mid-cap status have the potential to be upgraded to large-caps, according to AMFI’s new market cap list. These include:
- Muthoot Finance
- HDFC AMC
- Bosch
- Canara Bank
- Polycab India
- Hero MotoCorp
- Cummins India
- Swiggy
- Indian Bank
- Small-Caps on the Rise to Mid-Cap: Six small-cap stocks are poised for an upgrade to mid-cap status post AMFI’s rejig. These are:
- Cohance Lifesciences
- Endurance Technologies
- Apar Industries
- Poonawalla Fincorp
Overall Scheme Inflows in Q3 2025
Beyond IPOs, the broader mutual fund landscape also saw significant activity:
- Equity Schemes: Experienced a substantial inflow of Rs 1,06,554 crore in the Sept’25 quarter, a significant jump from Rs 66,869 crore in the previous quarter.
- Debt Schemes: Saw an outflow of Rs 3,156 crore in the Sept’25 quarter, a stark contrast to the inflow of Rs 2,01,516 crore in the previous quarter.
- Hybrid Schemes: Continued to attract investors with an inflow of Rs 45,570 crore in the Sept’25 quarter, following Rs 58,235 crore in the previous quarter.
- SIP Numbers: Monthly SIP (Systematic Investment Plan) numbers reached an all-time high, indicating growing retail investor confidence and participation.
Conclusion
The third quarter of 2025 demonstrates a clear trend: mutual funds are actively participating in the growth story of newly listed companies, particularly those in the small-cap segment. This strategic allocation, coupled with robust inflows into equity and hybrid schemes, paints a positive picture for the mutual fund industry and the broader market. Investors are increasingly looking towards diversified portfolios and the potential for long-term wealth creation through these avenues.
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