Kotak MF’s Nilesh Shah believes asset allocation is key despite record equity inflows

Asset allocation should remain the cornerstone of every investor’s strategy, says Nilesh Shah, MD of Kotak Mahindra AMC, even as mutual fund equity inflows hit a record ₹42,672 crore in July 2025.

“Just as equity is needed for your portfolio, debt, gold and real estate are also needed,” he told CNBC-TV18, urging investors not to ignore diversification despite attractive tax benefits in other instruments.

Shah noted that systematic investment plans (SIPs) have now become a household concept.

“SIP has now become a common language. It is spoken by millions of investors, and SIP flows are likely to continue,” he said, adding that investor behaviour has matured with many adopting a contrarian approach of buying on dips and selling on rallies.
The surge in inflows last month was driven by new fund offerings, which mobilised ₹30,416 crore — the highest monthly NFO collection on record. Shah expects NFO activity to remain strong as more mutual fund players enter the market under SEBI’s categorisation framework.

Small and mid cap SIPs have also seen steady commitment from investors despite periods of underperformance earlier this year. “In our poll by and large, 99% of the polled answered negatively when asked if they stopped their SIP in small and mid cap funds,” Shah said, crediting mutual fund distributors, advisors, and media for reinforcing long-term investing discipline.

On the debt side, Shah said parking-style funds, mainly used by corporates and HNIs, remain linked to banking liquidity, while income and arbitrage fund-of-funds are seeing rising retail interest that he believes is sustainable.

He also pointed out that incremental mutual fund growth is coming from beyond the top cities, with B30 (beyond top 30) towns and cities expanding faster, albeit from a lower base. Digitisation and financial literacy initiatives, he said, are enabling simpler access and execution for investors in these smaller markets.

Watch accompanying video for entire conversation.