A Historic Shift in Indian Investment Patterns
In a landmark development for India's financial markets, investments in gold Exchange Traded Funds (ETFs) surpassed inflows into equity-oriented mutual funds for the very first time in January 2026. This unprecedented trend, revealed by data from the Association of Mutual Funds in India (AMFI), highlights a significant pivot in investor sentiment towards the safety of precious metals amid global economic uncertainties.
Record-Breaking Inflows into Gold and Silver ETFs
According to the AMFI report released on Tuesday, inflows into gold ETFs more than doubled from December 2025 to reach an all-time high of Rs 24,040 crore in January. This marked the third consecutive monthly increase, reflecting strong investor confidence in the continued appreciation of gold prices. The total assets under management (AUM) for gold ETFs stood at an impressive Rs 1.84 lakh crore by the end of the month.
Silver ETFs also witnessed substantial net inflows, amounting to Rs 9,463 crore, pushing the combined AUM of precious metal ETFs to Rs 1.17 lakh crore. The surge in demand for these instruments is directly linked to the remarkable performance of gold and silver prices, which have doubled over the past year due to a combination of factors.
Drivers Behind the Gold Rush
The dramatic rise in gold prices can be attributed to several key elements:
- Safe-Haven Demand: Investors are increasingly seeking refuge in gold as a protective asset against market volatility.
- Weakening US Dollar: A softer dollar has made gold more attractive to international buyers.
- Central Bank Purchases: Robust buying by global central banks has bolstered gold's value.
- Geoeconomic and Geopolitical Turbulence: Ongoing global conflicts and economic instability have fueled demand for stable assets.
Compared to January 2025, net inflows into gold ETFs last month were nearly seven times higher, underscoring the accelerated shift in investment preferences.
Equity Mutual Funds Face Headwinds
In stark contrast, inflows into equity-oriented mutual funds declined for the third straight month, dropping 14% from December to Rs 24,029 crore in January. This downturn reflects the subdued performance of equity markets, with the benchmark Nifty 50 index falling approximately 3% during the month. Year-on-year, equity inflows were down 39%, indicating a broader trend of capital diversion from equities to gold ETFs.
Most equity fund categories experienced lower net inflows, with large- and mid-cap, mid-cap, small-cap, and flexi-cap funds all seeing reductions of over 20%. Notable exceptions included large-cap funds, which saw a 28% increase to Rs 2,005 crore, along with focused and sectoral funds that recorded sequential gains.
Expert Insights and Market Dynamics
A Balasubramanian, MD & CEO of Aditya Birla Sun Life AMC Ltd, commented, "The recent rise in gold and silver has led to a sharp increase in demand for gold and silver ETFs as investors look for different avenues to gain exposure to precious metals. However, equities continue to remain the preferred asset class for investment from a long-term wealth creation point of view."
The AUM of equity funds remained substantial at Rs 34.87 lakh crore as of January 31, 2026. Meanwhile, inflows through Systematic Investment Plans (SIPs) held steady at Rs 31,002 crore, with the number of SIP accounts growing to 10.29 crore from 10.11 crore in December.
Broader Market Movements and Debt Fund Trends
The shift in investment patterns occurs against a backdrop of significant foreign capital movements. In January, Foreign Portfolio Investors (FPIs) net sold nearly Rs 36,000 crore (approximately $4 billion) of Indian equities, continuing a trend from 2025 when they offloaded Rs 1.66 lakh crore (almost $19 billion). However, February has seen a reversal, with FPIs purchasing over Rs 15,000 crore ($1.7 billion) worth of shares, buoyed by improved sentiment following a reduction in US tariffs on Indian goods from 50% to 18%.
Debt mutual funds also experienced notable changes. While these funds saw inflows of Rs 74,827 crore in January—a recovery from a net outflow of Rs 1.32 lakh crore in December 2025—this figure was down 42% from the year-ago inflow of Rs 1.29 lakh crore. Nehal Meshram, senior analyst at Morningstar Investment Research India, explained, "The reversal largely reflects post year-end cash redeployment as corporate and institutional investors reinvest surplus balances that were temporarily drawn down in December."
The recovery in debt funds was led by the liquidity segment, with overnight funds attracting Rs 46,280 crore, liquid funds seeing Rs 30,682 crore of inflows, and money market funds gathering a healthy Rs 12,763 crore. Hybrid funds witnessed a surge of over 61% to Rs 17,356 crore, compared to Rs 10,756 crore a month earlier. The net AUM of debt funds increased by 11% year-on-year to Rs 18.9 lakh crore at the end of January.
Conclusion: A New Era for Indian Investors
This historic milestone in India's investment landscape signals a cautious approach among investors, prioritizing the stability of gold over the potential returns of equities in the face of global uncertainty. While gold ETFs have captured the spotlight, the sustained inflows through SIPs and the resilience of certain equity categories suggest a diversified strategy remains at play. As market conditions evolve, the balance between precious metals and traditional equity investments will continue to shape India's financial future.
