Equity mutual fund inflows moderated in July, falling 15% month-on-month to Rs 24,697 crore from Rs 28,973 crore in June, according to data released by the Association of Mutual Funds in India (AMFI). Despite the broader decline in flows, investors continued to show strong interest in relatively riskier small-cap and mid-cap schemes, with small-cap funds leading category-wise equity fund inflows, followed by midcaps. Large-cap funds, meanwhile, witnessed their first monthly outflow in 30 months. AMFI data showed that smallcap funds received the highest inflow at Rs 7,767 crore, marking the highest-ever inflow in the category. In June, the small cap category received an inflow of 5,601 crore marking a jump of 39% on a monthly basis.Also Read | Equity mutual fund inflows fall 15% to Rs 24,697 crore in July; smallcaps lead inflows Midcap funds received an inflow of Rs 6,192 crore in July marking a 2% jump from Rs 6,090 crore in June. On the other hand, largecap funds saw an outflow of Rs 1,321 crore in July, marking its first outflow in the last 30 months. The largecap category saw its last outflow in December 2023 of Rs 280 crore. Umesh Sharma, CIO-Debt, The Wealth Company Mutual Fund said that Mid-cap funds continued to attract robust inflows of Rs 6,192 crore, while smallcap funds saw stronger inflows of Rs 7,768 crore, highlighting investors' willingness to participate beyond the largecap universe. In contrast, largecap funds recorded net outflows of Rs 1,322 crore, the first outflow in 31 months, Sharma further said.Performance in JulyIn July, smallcap funds delivered an average return of 0.81% and out of 36 funds in the category, Samco Small Cap Fund delivered the highest return of around 3.49% in July, followed by Groww Small Cap Fund which delivered 2.60% return. HSBC Small Cap Fund lost the most of around 1.06%.Midcap funds delivered an average return of 1.34% in July. Out of 33 funds in the midcap category, Taurus Mid Cap Fund delivered the highest return of 7.28% in July, followed by Motilal Oswal Midcap Fund which delivered 5.89% in the same period. HSBC Midcap Fund lost the most of around 1.23%.Largecap funds delivered an average return of 1.90% and out of 34 funds in the category, Taurus Large Cap Fund delivered the highest return of 6.15% whereas Samco Large Cap Fund lost the most of around 0.33%.Azeez, Joint CEO, Anand Rathi Wealth Limited said that this divergence suggests that investors continue to see greater long term growth potential in mid and smallcap segments, even as they remain selective amid market volatility.While largecap funds saw a sharp reversal into outflows, strong inflows into smallcap and other equity categories indicate that investors continue to seek growth opportunities. The trend also highlights ongoing portfolio rebalancing amid evolving valuations, with investors favouring segments that offer stronger long-term return potential while remaining mindful of associated risks, said Ankur Punj, MD & Business Head, Equirus Wealth.Also Read | NFO Insight: WhiteOak Capital Dividend Yield Fund opens for subscription. Can REITs and InvITs boost diversification and income? Nifty Smallcap 250 - TRI gained 0.82% in July whereas Nifty Midcap 150 - TRI went up 1.51% in the same period and lastly, NIFTY 50 - TRI went up 1.77% in July.The AUM of smallcap funds stands at Rs 4.41 lakh crore and mid cap funds had an AUM of Rs 5.23 lakh crore. Largecap funds had an AUM of Rs 4.16 lakh crore.Nitin Agrawal, CEO-Mutual Funds, InCred Money said small-cap surged to Rs 7,768 crore, the highest single equity category inflow of the month and more than 30% jump over June, signalling that investors are actively leaning into segments where value has emerged after a period of correction.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@timesinternet.in alongwith your age, risk profile, and Twitter handle.