Investors have started to turn cautious ahead of the general elections — and are becoming wary about funnelling money into equity mutual funds at a time stock market returns in India have begun to wobble.

Data released by the Association of Mutual Funds in India (Amfi) on Friday revealed that fund flows into the equity schemes of the mutual fund industry tumbled to a 25-month low in February.

Inflows into equity funds (including equity-linked saving schemes) fell to Rs 5,122 crore, a sharp drop of almost 17 per cent from Rs 6,158 crore in January.

Observers attributed the fall to the volatility in the equity markets. Net inflows into such equity schemes have been showing a declining trend since November 2018 when they stood at Rs 8,414 crore.

But there is one glimmer of hope for the industry. Retail investors continue to commit funds to equity-oriented schemes through systematic investment plans (SIPs) — and there is no sign that their ardour for a popular route for investments has cooled, possibly fuelled by investment advisers who have been counselling them to shovel money into these schemes to even out any short-term losses and plug into a long-term returns strategy.

The Amfi data showed that inflows through these instruments were marginally higher at Rs 8,094 crore in February compared with Rs 8,064 crore in January.

Over the past one year alone, inflows through SIPs have soared to well over Rs 90,000 crore. Retail investors have continued to repose faith in SIPs and the industry will be hoping that this trend continues even if the general elections throw up a fractured mandate.

Liquid funds, on the other hand, witnessed an outflow of Rs 24,509 crore in February against an inflow of Rs 58,637 crore in the previous month.

The overall asset under management for the sector was stable at Rs 23.16 lakh crore against Rs 23.37 lakh crore in the previous month.

“Amid global uncertainty, tension at the border, liquidity tightness and credit events, retail investor behaviour to stay invested is quite heartening. The patience to stay invested underpins the investment philosophy of individual long-term wealth creation,” said Amfi CEO N. S. Venkatesh.

Outflows from balanced funds inched up to Rs 1,077 crore from Rs 952 crore during the same period.