Hybrid funds' AUM in India surge led by arbitrage, multi-asset allocation funds

New Delhi, Aug 9 (IANS) Arbitrage and multi-asset allocation funds saw the highest inflows in open-ended hybrid schemes during Q1 FY26, as investors moved to safer and diversified investment strategies, a report said on Saturday.

Hybrid funds' AUM saw a significant jump during the quarter, with arbitrage funds rising 22.2 per cent and multi-asset allocation funds up 15.4 per cent, according to a report by stockbroking platform Ventura Securities.

Balanced hybrid or aggressive hybrid funds experienced 8.9 per cent growth, while equity savings and dynamic asset allocation funds grew by 8.2 per cent and 8.1 per cent. In contrast, conservative hybrid funds saw the lowest growth among the categories, with a modest 3.4 per cent increase.

This trend indicated that, particularly in volatile market conditions, a more investors are favouring hybrid schemes that provide a balance between stability and returns, the report said.

In sector-wise holdings, private banks maintained their dominant position with holdings worth Rs 94,029 crore, significantly ahead of the next sector, IT-software, which stood at Rs 41,397 crore in Q1 FY 26. In the equity segment, the top five sectors remained unchanged, namely private banks, IT, refineries, pharmaceuticals, and telecom.

Among the top 10 sectors, refineries saw the highest market value growth at 15 per cent. Engineering - Construction also moved up, potentially due to increased allocations associated with infrastructure spending and capital expenditure cycles, the report said

Meanwhile, power generation and distribution experienced a 3 per cent decline in market value.

G-Secs remain the largest component of fixed-income investments in the mutual fund industry with Rs 57,312 crore in holdings (11 per cent decline in market value) during the quarter. Fund managers may be selectively reducing exposure amid shifting interest rate expectations, the report said.

NBFCs in the debt segment saw the most substantial growth, rising 24 per cent in value to Rs 27,616 crore, indicating increased appetite for higher-yield corporate debt instruments.

The report also suggested a strategic reallocation away from private bank bonds, possibly due to tighter spreads, credit concerns, or more attractive opportunities elsewhere.