Hybrid mutual fund schemes experienced significant inflows of ₹1.55 lakh crore in the fiscal year 2025-26, marking a 29% increase from the previous year. This surge was mainly driven by investors shifting towards diversified investment strategies in light of turbulent market conditions.
Despite elevated geopolitical tensions, such as the ongoing conflict in West Asia, the hybrid fund category gained traction as investors sought balanced investment solutions aimed at mitigating market volatility. Radhika Gupta, MD and CEO of Edelweiss Mutual Fund, noted, “Hybrid funds saw strong traction in FY26 as investors looked for balanced investment solutions during volatile times. Multi asset allocation funds, in particular, gained popularity due to their ability to deliver relatively stable performance across market cycles.”
The Association of Mutual Funds in India (AMFI) reported an increase in the number of hybrid fund folios, which rose to 1.9 crore in March 2026 from 1.56 crore a year earlier, adding 34 lakh investor accounts. The assets under management (AUM) for hybrid schemes grew to ₹10.35 lakh crore in March 2026, up from ₹8.83 lakh crore in March 2025, reflecting a 17% growth.
Gupta attributed this growth in AUM to a rising preference for diversified portfolios and asset allocation-led investing, stating that hybrid funds have become a crucial option for investors looking to participate in equities with moderated risk.
During FY26, equity markets remained volatile, influenced by global uncertainties, including trade concerns under former US President Donald Trump, the Russia-Ukraine conflict, and rising tensions in West Asia. In this context, gold outperformed equities, which benefited hybrid funds maintaining exposure to the precious metal. Feroze Azeez, Joint CEO of Anand Rathi Wealth Ltd, commented, “As a result, many hybrid funds were able to deliver relatively stable and higher near-term risk-adjusted performance compared to pure equity funds, which created recent bias among investors across this category.”
Investors showed a marked preference for diversified and asset-allocation strategies to navigate uncertain market conditions, further bolstering inflows into hybrid mutual funds. Rajesh Singla, CEO and Fund Manager at Alpha AMC, highlighted the appeal of hybrid funds for offering downside protection through debt investments. “The jump from ₹1.2 lakh crore in FY25 to ₹1.55 lakh crore in FY26 was not an accident; it reflected how investors responded appropriately to a complicated global landscape,” Singla noted.
He emphasized that hybrid funds provide a cushion that pure equity can’t offer, especially in the face of rising oil prices and fluctuating equity markets. Multi-asset allocation funds significantly drove this growth, while arbitrage funds also attracted substantial flows due to their low-risk, tax-efficient characteristics. Varun Gupta, CEO of Groww Mutual Fund, mentioned that the AUM of the broader hybrid category grew by approximately 21% between April 2025 and April 2026, while multi-asset funds saw growth exceeding 65%.
In FY26, 17 hybrid fund new fund offers (NFOs) were launched compared to 12 in the previous fiscal year; however, cumulative inflows from these NFOs declined to around ₹4,106 crore from nearly ₹4,792 crore in FY25. Azeez remarked that this trend indicates a preference among investors for established hybrid funds with proven track records over newly launched schemes.
Looking ahead, Gupta expected continued strong investor interest in the current financial year. “The outlook for hybrid funds remains positive as categories like arbitrage, equity savings, balanced advantage, aggressive hybrid, and multi-asset allocation funds are well-suited for volatile market environments like the one we are witnessing today,” she stated.
Published on May 17, 2026.
