Mutual funds may have deployed Rs 80,000 crore in March crash: Report

Mutual funds are estimated to have deployed about Rs 80,000 crore into Indian equities during the March market crash, sharply drawing down the sector’s cash buffers, according to estimates by ICICI Securities. The brokerage estimates that active equity mutual fund schemes, which were sitting on cash of around Rs 1.7 lakh crore or 4.9% of assets under management (AUM) as of February 2026, bought Rs 80,000 crore worth of Indian equities in response to strong selling by FIIs during March.

The heavy buying came amid an over 11% correction in the market in March and aggressive FII outflows, which ICICI Securities links to the “strong inverse correlation between Indian stocks and crude oil when prices exceed the USD 90–100/bbl range” and the ongoing Gulf crisis.

Assuming equity inflows into mutual funds remained in line with recent trends at around Rs 25,000 crore, the report estimates that the cash pile of active mutual funds likely dropped to about Rs 1.3 lakh crore by the end of March.


If the Gulf crisis continues to weigh on sentiment for another month, mutual fund cash levels could fall further to Rs 1 lakh crore (a 50% drop from April 2025 peak of Rs 2 lakh crore), assuming no net redemptions, the report warns.

Even after the deployment, the cash-to-AUM ratio for active equity mutual funds is projected at roughly 3% post the March correction, which the brokerage describes as “a normal liquidity level and not a cause for alarm, provided net inflows continue.”

“Consequently, the most critical factor to watch out for Mar’26 will be the net inflows into equity schemes of MFs,” it adds, flagging the risk that any shift to net redemptions could drag cash levels even lower.

Within categories, flexi-cap and small-cap funds entered the March selloff with relatively high cash cushions. As of February 2026, flexi-cap funds held the highest absolute cash at around Rs 42,800 crore, translating into a cash-to-AUM ratio of 7.7%, while small-cap funds maintained cash of about Rs 23,200 crore and a 6.4% cash-to-AUM ratio.

Among large-, mid- and small-cap schemes, small-caps held the highest cash level of Rs 23,200 crore, followed by mid-cap and large-cap funds at Rs 17000 crore and Rs 15300 crore, respectively, the report notes, reiterating its earlier view that domestic liquidity remains the “joker in the pack” for the SMID (small and midcap) space in the current crisis.

Overall, equity-oriented schemes saw net inflows of Rs 26,000 crore in February 2026, taking their active equity AUM to Rs 35.4 lakh crore before the March drawdown. Systematic investment plan (SIP) flows, at Rs 29,800 crore in February, have begun to “flatten on increased volatility,” even as domestic institutional investors’ dominance in Indian equities has risen to record levels and will be “tested during the current crisis,” ICICI Securities points out. The brokerage concludes that while mutual funds have already played a pivotal role in cushioning the March crash through an estimated Rs 80,000 crore deployment, the durability of this support now hinges on the resilience of retail inflows in the months ahead.