Hybrid Funds Surge 29% Amidst Market Volatility

Hybrid mutual fund schemes experienced a significant surge in inflows, attracting Rs 1.55 lakh crore in the fiscal year 2025-26. This represents a substantial 29% increase compared to the preceding fiscal year. The growing popularity of these funds is attributed to investors seeking diversified and balanced investment strategies amidst heightened market volatility and geopolitical tensions.

By March 2026, the number of hybrid fund folios expanded to 1.9 crore, indicating a rise in investor accounts. Concurrently, the assets under management (AUM) for these schemes grew by 17 percent to Rs 10.35 lakh crore. This growth reflects a clear investor preference for asset allocation-led investing and diversified portfolios, offering participation in equities with moderated risk.

Market volatility during FY26, influenced by global uncertainties, saw gold outperforming equities in the short term. This dynamic benefited hybrid funds that maintained exposure to precious metals, enabling them to deliver relatively stable, risk-adjusted performance compared to pure equity funds. Multi-asset allocation funds and arbitrage funds were particularly popular drivers of this growth.

Looking ahead, the outlook for hybrid funds remains positive. Experts anticipate continued strong investor interest, as categories like balanced advantage and multi-asset allocation funds are well-suited to navigate current volatile market environments. This suggests a sustained trend of investors favoring diversification within the market to manage uncertainty.