Fund inflows into Indian equities cooled in July as global headwinds including a sharp oil price spike impacted investor sentiment. Despite the moderation, demand for riskier small- and mid-cap strategies remained robust, indicating continued appetite for domestic growth stories. Foreign investors showed a preference for diversified exposure beyond large-cap stocks, with small-cap funds attracting significant fresh capital.

The easing flows reflect heightened caution amid rising commodity costs and global economic uncertainty, though $2.8 billion in new investments still entered Indian equity funds during the month. Market participants noted that small-cap strategies outperformed broader benchmarks, sustaining their popularity among both domestic and international funds.