ICICI Prudential Asset Management Company has flagged an increase in mutual fund redemptions as a key factor weighing on net flows, even as gross sales across the industry remain broadly steady. The company’s management said investors are withdrawing more money from existing schemes, making it difficult to determine whether the proceeds are being reinvested in other ICICI Prudential funds or leaving the asset manager’s platform altogether. The comments, made during the company’s earnings call on October 12, 2026, highlight the growing importance of tracking withdrawals alongside new investments when assessing the health of the mutual fund industry.
The development comes as investors continue to shift allocations between mutual fund categories. Mid-cap and small-cap schemes accounted for 43% of industry equity net flows during the September quarter, up from the previous quarter, while systematic transactions at ICICI Prudential declined between June and September. Despite these pressures, the company’s average mutual fund assets under management increased 14.4% year over year to ₹11.61 lakh crore in the September quarter. The figures illustrate how an asset manager can continue expanding its overall asset base while experiencing pressure on net flows and changes in investor behaviour.
Key Takeaways
- Redemptions are rising: ICICI Prudential AMC said higher withdrawals are weighing on net mutual fund flows.
- Gross industry sales remain steady: Management said the broader flow of new investments has remained broadly consistent, making redemptions a key factor behind weaker net flows.
- Investor money is rotating: The company cannot reliably determine whether redeemed funds are moving into its other schemes or leaving its platform.
- Mid- and small-cap funds gain share: These categories accounted for 43% of industry equity net flows in the September quarter.
- Systematic transactions decline: ICICI Prudential’s monthly systematic transactions fell to ₹4,672 crore in September from ₹4,872 crore in June.
- Assets under management grow: Quarterly average mutual fund AUM increased 14.4% year over year to ₹11.61 lakh crore.
- Profit remains positive: The company reported Q2 FY27 net profit of ₹889 crore, up approximately 6% year over year, while revenue from operations rose 16.3%.
Why ICICI Prudential AMC Is Flagging Higher Redemptions
The main concern raised by ICICI Prudential AMC is the difference between money entering mutual funds and money leaving them.
During the earnings call, Chief Financial Officer Naveen Agarwal acknowledged that redemptions had increased. He said gross flows at the industry level remained broadly consistent with the previous year, suggesting that the pressure on net flows was not necessarily the result of a widespread decline in new investments.
Net flows represent the difference between money invested and money withdrawn over a period. When investors purchase more units than they redeem, net flows are positive. When redemptions exceed new investments, net flows turn negative.
A fund house can therefore experience steady gross sales but weaker net flows if withdrawals increase. This distinction is particularly important when evaluating large asset managers, because the volume of money entering their schemes alone does not show how much capital they retain.
ICICI Prudential has also highlighted the difficulty of determining the destination of redeemed money. Investors may withdraw from one scheme and invest in another scheme managed by the same company, or they may move their money to a competing asset manager, another financial product or cash.
The company said it could not reliably track where the money ultimately went or when it might return. As a result, higher redemptions do not automatically mean that every withdrawn rupee represents a permanent loss of assets for the fund house.
Gross Sales and Net Flows: What Is the Difference?
The distinction between gross sales and net flows is central to understanding the latest comments.
Gross sales measure new investments made into mutual fund schemes during a period. Redemptions measure the money investors withdraw. Net flows account for both.
For example, if investors put ₹100 crore into a fund house during a month and redeem ₹80 crore, the fund house records ₹100 crore in gross sales but only ₹20 crore in net inflows.
If gross sales remain unchanged the following month but redemptions rise to ₹95 crore, net inflows fall to ₹5 crore. The asset manager is still attracting new money, but the amount it retains from those transactions has declined.
| Metric | What it measures | Why it matters |
|---|---|---|
| Gross sales | New money invested in schemes | Indicates demand for mutual fund products |
| Redemptions | Money withdrawn by investors | Shows the volume of capital leaving schemes |
| Net flows | Gross sales minus redemptions | Indicates the net addition or withdrawal of money |
| Assets under management | Value of assets managed | Reflects investment values and net asset movements |
| Systematic transactions | Recurring investment and transfer activity, as defined by the company | Helps assess ongoing investor activity |
These indicators should not be treated as interchangeable. A company can attract strong gross sales but record weak net flows, while its total AUM may still increase because of market gains, investment performance or assets accumulated in earlier periods.
The distinction also explains why the company’s rising AUM does not contradict management’s warning about redemptions.
Investors Are Shifting Towards Mid-Cap and Small-Cap Funds
Another important development is the growing contribution of mid-cap and small-cap mutual fund schemes to industry equity net flows.
According to the company’s earnings-call discussion, mid-cap and small-cap categories accounted for 43% of industry equity net flows in the September quarter, up from the previous quarter.
These categories invest in companies outside the largest segment of the stock market. Mid-cap funds typically focus on medium-sized listed companies, while small-cap funds invest in smaller businesses that can have different growth opportunities and risk characteristics.
Their growing share of net flows suggests that investor allocations are increasingly concentrated in these categories. However, the figure does not establish that all investors are moving money out of large-cap funds or that mid- and small-cap schemes are receiving higher inflows in every month.
Investor behaviour can also vary by investment horizon. Some investors use systematic investment plans to build exposure gradually, while others move money between categories in response to market conditions or changes in their financial goals.
Why the shift matters for asset managers
Mutual fund companies depend on the mix of products they sell, the amount of money they retain and the stability of their assets.
A growing allocation to mid-cap and small-cap funds can support demand for those products, but it also makes it important for fund managers to communicate market risks clearly. Smaller-company stocks can be more volatile and may be less liquid than shares of large, established businesses.
For asset managers, category-level flows can influence product demand, distribution priorities and the composition of assets under management. But inflows alone do not establish whether a category is attractively valued or likely to deliver better future returns.
Systematic Transactions Decline Between June and September
ICICI Prudential AMC also reported a decline in its monthly systematic transactions, which include systematic investment plans (SIPs) and systematic transfer plans (STPs) across its mutual fund and portfolio management services businesses.
The company’s systematic transactions stood at ₹4,672 crore in September 2026, compared with ₹4,872 crore in June 2026.
| Period | Monthly systematic transactions |
|---|---|
| June 2026 | ₹4,872 crore |
| September 2026 | ₹4,672 crore |
| Change | Down ₹200 crore |
| Percentage change | Approximately -4.1% |
Source: ICICI Prudential AMC management commentary reported by Moneycontrol. The comparison covers June and September, not necessarily every month in between.
The decline was approximately 4.1% over the period. It provides another indicator of changing investor activity, although it does not independently establish the cause of higher redemptions.
SIPs allow investors to invest a fixed amount at regular intervals. STPs enable money to be transferred systematically between schemes, often from a relatively lower-volatility fund into an equity-oriented fund over time.
Management also pointed out that the systematic transaction figure can be affected when investors accelerate systematic transfers and deploy money as a lump sum during market corrections. In such cases, the timing and structure of investment activity can change without necessarily indicating that investors have abandoned the market.
For this reason, a decline in systematic transactions should be considered alongside gross sales, redemptions, net flows and total assets rather than interpreted as a standalone measure of investor confidence.
ICICI Prudential AMC’s AUM Continues to Grow
Despite the pressure on net flows, ICICI Prudential AMC reported growth in its average mutual fund assets under management.
Quarterly average AUM reached ₹11.61 lakh crore for the three months ended September 30, 2026, an increase of 14.4% from ₹10.15 lakh crore in the corresponding quarter of the previous financial year.
The company’s mutual fund market share stood at 13.3%, according to its reported figures.
AUM measures the value of assets managed by a fund house. It can change because of net investor flows, movements in the underlying securities and other portfolio-related changes. An increase in AUM therefore does not necessarily mean that net investor flows have strengthened during the same period.
For example, a fund house may record net withdrawals but still report higher AUM if the market value of its investments rises sufficiently. Conversely, a fund house can attract net inflows while its AUM falls if market losses outweigh the additional money invested.
The annual growth in ICICI Prudential’s AUM indicates that its managed asset base remained larger than a year earlier. The higher-redemption comments, meanwhile, highlight a shorter-term challenge in retaining money invested in its schemes.
Equity and hybrid funds remain significant businesses
The company’s Q2 FY27 disclosures also showed growth across major segments of its mutual fund operations.
Average assets in equity and equity-oriented schemes rose 16.3% year over year to ₹6.59 lakh crore. Equity-oriented hybrid schemes recorded a 19.7% increase in average AUM to ₹2.29 lakh crore.
These figures indicate that the company’s broader asset base continued to expand. However, category-level AUM growth should not be confused with the latest quarter’s net flows, because investment performance and changes in market values also affect assets under management.
The distinction will remain important as investors rotate between categories and fund houses seek to maintain stable inflows.
Q2 FY27 Financial Results: Profit Rises 6%
ICICI Prudential AMC’s financial performance provides additional context for the discussion about redemptions.
The company reported consolidated net profit of ₹889 crore in Q2 FY27, compared with ₹838 crore in the same quarter of the previous financial year. Revenue from operations rose to approximately ₹1,674 crore from ₹1,439 crore a year earlier.
| Financial metric | Q2 FY26 | Q2 FY27 | Year-over-year change |
|---|---|---|---|
| Net profit | ₹838 crore | ₹889 crore | +6.1% |
| Revenue from operations | ₹1,439 crore | ₹1,674 crore | +16.3% |
| Quarterly average mutual fund AUM | ₹10.15 lakh crore | ₹11.61 lakh crore | +14.4% |
Source: ICICI Prudential AMC Q2 FY27 results, as reported by The Economic Times. Figures are rounded.
Revenue growth exceeded profit growth during the quarter. This means profit increased at a slower rate than revenue, although the figures alone do not identify every factor affecting expenses and profitability.
The results show that the company remained profitable and expanded revenue even as management flagged a challenge in net flows. Investors assessing the business will need to consider both financial performance and the sustainability of asset growth.
For an asset manager, a stable asset base and recurring customer investments can be important to revenue visibility. However, higher redemptions can create pressure if they persist, especially when they affect categories that are important to the company’s business mix.
What Higher Redemptions Mean for the Mutual Fund Industry
The comments from ICICI Prudential AMC reflect a broader challenge for the mutual fund industry: measuring the durability of investor capital.
Redemptions do not always represent a loss of confidence in mutual funds. Investors may withdraw money to meet financial needs, rebalance portfolios, switch schemes or move to a different asset manager. Others may change allocations because of market volatility or changes in their investment objectives.
For asset managers, the important question is whether redemptions are temporary or persistent. A short period of withdrawals may have a limited effect on a company’s long-term position, while sustained net outflows can affect its asset base and market share.
The inability to track the final destination of every redemption makes that assessment more difficult. A company can see money leave one scheme without knowing whether the investor has moved it into another product within the same platform.
Industry-wide data can provide a broader view of investor behaviour, but individual fund houses may not have complete visibility into all transactions occurring outside their own systems.
The increase in the share of equity net flows going to mid-cap and small-cap schemes is one sign that investor allocations are changing. The decline in ICICI Prudential’s systematic transactions is another indicator worth monitoring, though neither figure alone establishes that the industry is entering a prolonged outflow cycle.
What Investors and Market Participants Should Watch Next
The next few months will help determine whether the higher redemptions reported by ICICI Prudential AMC are temporary or part of a more sustained shift in investor behaviour.
Several indicators will be useful:
- Monthly net flows: Whether the gap between gross sales and redemptions widens or narrows.
- Category-level flows: Whether mid-cap and small-cap schemes continue to attract a larger share of equity net flows.
- Systematic investment activity: Whether SIP and STP transactions recover, stabilise or decline further.
- AUM and market share: Whether the company maintains asset growth relative to competing fund houses.
- Profitability: Whether revenue and profit continue to grow as the company’s asset base changes.
- Investor allocation patterns: Whether redemptions appear to reflect portfolio rotation or a more persistent movement away from particular schemes.
The company’s ability to retain assets will depend partly on investor outcomes, product suitability, distribution and the relative appeal of competing schemes. Broader market performance will also influence the value of assets under management.
For investors, these developments are not a direct instruction to redeem or invest. Fund flows describe aggregate behaviour and do not establish whether a particular scheme is suitable for an individual’s financial goals, risk tolerance or investment horizon.
The Bigger Picture
ICICI Prudential AMC’s comments highlight why mutual fund industry health cannot be judged solely by gross sales or AUM growth. Strong new investments can coexist with rising withdrawals, while market gains can lift managed assets even when net flows are under pressure. Understanding these differences is essential when comparing fund houses and assessing the sustainability of their growth.
The shift towards mid-cap and small-cap schemes adds another dimension to the picture. Investors are allocating money unevenly across categories, and fund houses must respond to changing demand while managing market risks and retaining customers. The longer-term impact on ICICI Prudential will depend on whether the redemption trend persists, where investors redirect their money and how the company performs across its major fund categories.
Looking Ahead
ICICI Prudential AMC’s next set of monthly flow data and quarterly disclosures will help show whether redemptions continue to weigh on net flows. Investors and analysts will be watching systematic transaction activity, category-level equity flows, market share and AUM growth to determine whether the pressure is temporary or becoming more persistent. Management’s inability to identify the final destination of all redeemed money means the pattern will need to be assessed through several indicators rather than one measure alone.
For the broader mutual fund industry, the central issue is the balance between attracting new investments and retaining existing assets. ICICI Prudential’s latest results show that revenue, profit and average AUM grew year over year even as management flagged higher redemptions. Whether that combination remains sustainable will depend on market conditions, investor allocation choices and the company’s ability to maintain demand across its products.
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