New Delhi, Aug 9 (NationPress) Arbitrage and multi-asset allocation funds recorded the most substantial inflows in open-ended hybrid schemes during Q1 FY26, as investors opted for safer and more diversified investment options, according to a report published on Saturday.

The AUM of hybrid funds witnessed a remarkable increase in this quarter, with arbitrage funds climbing by 22.2 percent and multi-asset allocation funds advancing by 15.4 percent, as detailed in a report from the stockbroking platform Ventura Securities.

Balanced hybrid and aggressive hybrid funds saw an increase of 8.9 percent, while equity savings and dynamic asset allocation funds grew by 8.2 percent and 8.1 percent respectively. In contrast, conservative hybrid funds had the least growth among the categories, achieving only a 3.4 percent rise.

This trend suggests that, especially during turbulent market conditions, an increasing number of investors are leaning towards hybrid schemes that provide a balance of stability and returns, the report highlighted.

In terms of sector-wise holdings, private banks remained the front-runners, holding Rs 94,029 crore, significantly ahead of the IT-software sector, which recorded Rs 41,397 crore in Q1 FY26. The leading sectors in equity remained unchanged: private banks, IT, refineries, pharmaceuticals, and telecom.

Among the top ten sectors, refineries experienced the greatest market value growth at 15 percent. The engineering and construction sectors also increased, likely due to heightened allocations tied to infrastructure spending and capital expenditure cycles, as per the report.

Conversely, the power generation and distribution sector faced a 3 percent decline in market value.

Government securities (G-Secs) continue to dominate fixed-income investments in the mutual fund sector, holding Rs 57,312 crore (with an 11 percent decline in market value) during the quarter. Fund managers may be selectively reducing exposure in light of changing interest rate expectations, the report suggested.

Non-banking financial companies (NBFCs) in the debt segment saw the most significant growth, increasing by 24 percent in value to Rs 27,616 crore, reflecting a greater appetite for higher-yield corporate debt instruments.

The report also indicated a strategic shift away from private bank bonds, potentially due to tighter spreads, credit concerns, or more attractive opportunities elsewhere.