From Eternal and Shriram Finance to JSW Steel, here’s a detailed look at the top mutual fund purchases in August.

The Indian mutual fund industry experienced a mixed month in August 2025. While the long-term trend of strong retail participation remained intact, several short-term shifts in equity assets under management (AUM), sector allocations, and stock-level preferences highlighted how fund managers responded to volatile market conditions. Motilal Oswal Financial Services (MOSL) released its latest report summarizing these movements, offering valuable insights into where institutional investors are directing capital and how this may shape the equity markets going forward.

This analysis will walk through the key points raised in the MOSL report and provide broader context. We will examine the decline in AUM, the slowdown in inflows, the sector-level rebalancing, and the individual stocks that attracted the most buying interest. Additionally, we will explore why fund managers made these moves, how they compare with past months, and what implications they carry for investors, both institutional and retail.

Understanding the AUM Movement

1.1. What is AUM and why does it matter?

Assets under management (AUM) refers to the total value of all assets—equity, debt, liquid, hybrid, and other securities—that mutual funds manage on behalf of investors. In the case of equity mutual funds, it specifically represents the combined market value of all the shares held across schemes.

Changes in equity AUM can be influenced by two major factors:

1. Market performance – If stock indices rise or fall, the valuation of existing holdings changes, directly impacting AUM.
2. Investor flows – New investments through lumpsum contributions or Systematic Investment Plans (SIPs) increase AUM, while redemptions reduce it.

Tracking AUM month-on-month provides a window into investor sentiment, the health of the mutual fund industry, and its alignment with broader market trends.

1.2. The August 2025 decline in AUM

According to MOSL, equity AUM for domestic mutual funds declined marginally by 0.6% MoM, falling to ₹36.2 trillion in August 2025. At first glance, this may appear like a minor change, but given the scale of the industry, it represents a significant shift in portfolio valuations.

The main driver behind this decline was not a withdrawal of investor confidence but rather the weakness in the broader markets. The benchmark Nifty 50 index slipped 1.4% during August. Since mutual fund portfolios are heavily tied to index performance, a fall in the Nifty naturally translated into a lower valuation of holdings.

This indicates that the decline in AUM was more of a market-driven adjustment rather than a result of investors pulling out funds. In fact, despite volatility, net inflows into mutual funds continued (though at a slower pace), showing resilience of investor participation.

2. Investor Flows: Sales, Redemptions, and Net Inflows

2.1. Equity sales activity slows down

MOSL reported that equity scheme sales—the total purchases of mutual fund units by investors—declined sharply by 18.5%, dropping to ₹687 billion in August compared to July.

This decline could be attributed to:

• Market caution: Retail investors often hesitate to deploy large lumpsum investments during volatile phases.
• Seasonality: Certain months historically see lower activity due to market positioning, tax considerations, or liquidity needs of investors.
• Profit booking: With markets hovering near highs earlier in the year, some investors may have reduced new purchases in anticipation of corrections.

2.2. Redemptions slow down too

Interestingly, while sales slowed, redemptions also dropped by 14.1%, amounting to ₹338 billion in August. This indicates that existing investors were not rushing to exit despite market volatility.

Lower redemptions show confidence in long-term investing, particularly through SIPs. Retail investors in India have increasingly matured in their behavior, staying invested through short-term corrections rather than reacting to every dip.

2.3. Net inflows remain positive but moderate

The combination of lower sales and lower redemptions resulted in net inflows of ₹349 billion in August, compared with ₹450 billion in July.

While this moderation reflects a softer pace, the important takeaway is that inflows remained firmly positive. This continued inflow amidst volatility underscores the strength of the domestic savings trend and the role of mutual funds as the preferred investment vehicle for long-term wealth creation in India.

3. Sectoral Allocation Shifts

One of the most insightful parts of the MOSL report was the analysis of how fund managers shifted sectoral weights in August 2025. These shifts often reveal institutional expectations about sectoral growth, earnings visibility, and resilience against volatility.

3.1. Sectors that gained weight

According to the report, mutual funds increased allocations to:

• Automobiles
• Technology (IT services, digital, product companies)
• Consumer (FMCG and discretionary)
• Telecom
• Retail
• Media

Why these sectors?

• Automobiles: Demand recovery, festive season expectations, and easing supply-chain bottlenecks likely drove confidence.
• Technology: Despite weak near-term results, valuations became attractive after corrections, and fund managers looked to accumulate long-term leaders.
• Consumer & Retail: Domestic demand remained robust, supported by rising disposable incomes, urban consumption, and rural recovery.
• Telecom: Strong data consumption trends and tariff hikes improved revenue visibility.
• Media: The sector benefited from rising advertising spends and digitization.

These allocations reflect a domestic demand-driven investment approach, where fund managers are betting on sectors less dependent on global volatility.

3.2. Sectors that lost weight

On the other hand, fund managers reduced exposure to:

• Private Banks
• Healthcare
• Capital Goods
• Oil & Gas
• Chemicals
• Real Estate

Why the moderation?

• Private Banks: After a long rally, valuations in banking had become stretched; also, margin pressures were emerging.
• Healthcare: The sector had underperformed due to regulatory issues and slow recovery in exports.
• Capital Goods: Some profit booking was likely after strong performance in the infrastructure cycle.
• Oil & Gas: Global crude price volatility and policy uncertainty made fund managers cautious.
• Chemicals: Global demand weakness and pricing pressure in specialty chemicals reduced near-term outlook.
• Real Estate: After a strong rally in 2024–25, investors appeared to rebalance exposure due to stretched valuations.

This reallocation shows that fund managers were actively managing risk by trimming sectors facing short-term headwinds while rotating into areas of structural growth.

4. Stock-Level Activity: Top Buys in August

Perhaps the most telling part of the report was the stock-specific buying activity. According to MOSL, four stocks—Eternal (formerly Zomato), Shriram Finance, JSW Steel, and Infosys—stood out as the top picks for fund managers in August 2025. Bajaj Finserv also saw meaningful accumulation.

4.1. Eternal (Zomato-parent)

• Mutual fund holdings increased 12.3% MoM.
• 24.59 crore shares were added, taking the total to 216.5 crore shares.
• The investment value touched ₹68,000 crore.
• Stock return in August: +2%.

Interpretation: Despite modest price appreciation, fund managers displayed strong conviction in Eternal’s long-term growth story, particularly its leadership in food delivery, quick commerce, and platform synergies. Institutional buying suggests confidence in revenue expansion and eventual profitability, even if near-term valuations appear demanding.

4.2. Shriram Finance

• Holdings rose by 6.9% to 19.4 crore shares.
• Valuation of MF holdings: ₹11,290 crore.
• Stock return in August: –8%.

Interpretation: The divergence between institutional buying and falling stock prices highlights a long-term accumulation strategy. Fund managers are likely betting on the structural growth of NBFCs in consumer and small-business lending, despite short-term concerns like rising borrowing costs.

4.3. JSW Steel

• Holdings increased by 6.4% to 10.6 crore shares.
• Valuation: ₹10,920 crore.
• Stock return in August: negative.

Interpretation: The metals sector faced headwinds due to global demand weakness and commodity price fluctuations. Yet, mutual funds added JSW Steel, showing faith in its market leadership, expansion projects, and alignment with India’s infrastructure growth story.

4.4. Infosys

• Mutual fund holdings rose 5.2% MoM to 82.4 crore shares.
• Valuation: ₹1,21,140 crore.
• Stock return in August: –2.6%.

Interpretation: Large-cap IT stocks like Infosys faced ongoing pressure from weak global tech spending. However, institutional investors treated the correction as a buying opportunity, banking on the sector’s medium-to-long-term digital transformation demand.

4.5. Bajaj Finserv

• Holdings increased 5% MoM to 11.2 crore shares.
• Valuation: ₹21,460 crore.
• Stock return in August: –1.8%.

Interpretation: Despite weakness in financial services, fund managers added Bajaj Finserv, citing its diversified business model (insurance, lending, and wealth management) as a long-term compounder.

5. What These Trends Mean for Investors

The MOSL data highlights several important lessons for retail and institutional investors alike:

1. AUM declines don’t always mean withdrawals – The fall in August AUM was market-driven, not flow-driven. Investors should not panic over such short-term movements.
2. Mutual funds think long term – Even when stocks like Shriram Finance, JSW Steel, or Infosys delivered negative monthly returns, funds accumulated them for their future potential.
3. Sector rotation is a constant process – Professional managers regularly rebalance portfolios, increasing exposure to demand-driven sectors while trimming those with headwinds.
4. SIP investors benefit from consistency – Since inflows remain positive even in volatile months, SIP investors automatically accumulate units at lower NAVs during corrections, strengthening long-term compounding.
5. Institutional activity is a sentiment signal – Heavy buying in stocks like Eternal signals institutional confidence, which can often precede future performance if the underlying fundamentals play out.

6. Broader Market Context

It is also important to place the August 2025 numbers in the broader trajectory of the Indian market:

• The mutual fund industry has witnessed record SIP registrations in 2025, crossing previous highs.
• Retail participation remains robust despite global uncertainties.
• AUM expansion over the past decade has been phenomenal, reflecting rising financialization of household savings.
• Volatility is a natural part of equity investing, but professional management ensures risks are spread across sectors and stocks.

Conclusion

The August 2025 data from MOSL paints a picture of a resilient mutual fund industry navigating through market volatility with strategic rebalancing. While overall equity AUM dipped slightly due to weaker index performance, investor flows remained positive, highlighting continued confidence.

Sectoral allocations revealed a tilt toward domestic demand-driven industries such as automobiles, technology, consumer, telecom, and retail, while trimming exposure to private banks, healthcare, and real estate. At the stock level, heavy buying in Eternal, Shriram Finance, JSW Steel, Infosys, and Bajaj Finserv underscored institutional faith in long-term growth stories despite near-term price corrections.

For investors, the message is clear: stay disciplined, focus on the long term, and view volatility as an opportunity rather than a threat. Mutual funds continue to serve as a cornerstone for wealth creation in India, and the August activity is yet another reminder of the industry’s adaptability and resilience.