The August 2026 data shows a significant change in the inflow data for two hybrid categories that you may have missed. Balanced hybrid and aggressive hybrid funds were clubbed together in the July 2026 data, with a total of 33 funds recording net inflows of ₹1,986 crore.
However, in August 2026, the two categories were reported separately. Four balanced hybrid funds recorded net inflows of ₹1,836 crore, while 30 aggressive hybrid funds recorded inflows of ₹1,323 crore.
As per ‘s categorisation rule, balanced hybrid funds must invest 40%-60% each in equity and debt instruments. Aggressive hybrid funds must invest 65%-80% in equity and 20%-35% in debt.
Why are investors favouring balanced hybrid funds despite their lower returns? Here’s what you need to know.
How did aggressive and balanced hybrid funds perform?
Based on Value Research’s category average returns data, aggressive hybrid funds performed better than balanced hybrid funds across the available periods.
- 3 months: 4.09% for aggressive funds vs 3.04% for balanced hybrid funds.
- 6 months: 6.14% vs 3.92%
- 1 year: 3.51% vs 2.61%
Over three, five and seven years, the aggressive hybrid category gave 11.29%, 10.60% and 14.59% returns, respectively. Long-term category returns are not available for the balanced hybrid category.
The difference is also visible at the scheme level. Bank of India Aggressive Hybrid Fund was the top performer with a 1-year return of 16.72%, while 360 ONE Balanced Hybrid Fund delivered just 5.99%. (Data as on 9 September 2026)
What explains the August inflows in balanced hybrid funds?
Sougata Basu, Founder and CEO, CashRich, said the data does not indicate a broad investor preference for balanced hybrid funds.
“Of the ₹1,835.50 crore that went into balanced hybrid funds in August, ₹1,818 crore came from the SBI Balanced Hybrid Fund NFO. If you take it out, the other three schemes collected about ₹17 crore net,” Basu said.
The balanced category has around ₹3,045 crore in assets (AUM) across 75,000 folios, compared with ₹2.64 lakh crore across 64 lakh folios for aggressive hybrid funds.
“So this is a two-week distribution push against 30 funds with steady month-on-month money. Aggressive Hybrid funds took in ₹3,779 crore gross in August and returned ₹2,457 crore in redemptions. That is mature money moving both ways. Balanced Hybrid saw ₹19 crore in redemptions, given that much of the money had only just arrived through an NFO,” he added.
Which one should you choose?
“Balanced hybrid funds offer meaningful equity participation with a larger debt cushion, which can appeal to investors looking for a smoother experience through volatile markets, said Prasenjit Paul, Fund Manager at 129 Wealth and Research Analyst at Paul Asset.
However, investors comfortable with higher equity-led volatility may prefer aggressive hybrid funds, Paul added.
Basu explained the three-step framework:
- First, equity exposure. Aggressive hybrid funds hold 65%-80% in equity, while balanced hybrid funds hold 40%-60%. If equity falls 30% and debt remains unchanged, a fund with 75% equity could fall roughly 22%, compared with about 15% for one with 50% equity. This means aggressive hybrid funds can see bigger falls when equity markets decline.
- Second, taxation. Aggressive hybrid funds are taxed like equity, with long-term gains taxed at 12.5% after one year, subject to the ₹1.25 lakh annual exemption. Balanced hybrid funds have less than 65% equity, so they are taxed like non-equity funds. Gains are taxed at the investor’s applicable slab rate if held for up to two years and at 12.5% if held for more than two years.
- Third, track record. Aggressive hybrid funds have 30 schemes and ₹2.64 lakh crore in assets, with performance across several market cycles. Balanced hybrid has only four schemes and ₹3,045 crore in assets, with some launched only recently.
“The general principle is simple. You need to match the equity allocation to your investment time horizon, and the market fall you can tolerate, or your risk appetite. The tax treatment based on how long you actually plan to stay invested is also important,” Basu added.