Mutual funds are considered as one of the best available investments as compared to others as they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading cost than if they tried to do it on their own. The biggest advantage to mutual funds is diversification, by minimizing risk and maximizing return. The Indian mutual fund industry is growing rapidly and this is reflected in the increase in Assets under management of various fund houses. Mutual fund investment is less risky than directly investing in stocks and is therefore a safer option for risk adverse investors. Monthly NAV of different schemes have been used to calculate the returns from the fund schemes. The main objective of the study is to analyze the relationship between mutual funds investment flow and stock market returns in India. And to predict the selected sector mutual funds performance in India. In the present scenario many AMC's are emerging and all the mutual fund companies come with many new schemes.