(Reuters) - U.S. equity funds attracted inflows for the week ending March 12 as some investors were buoyed by a weaker CPI reading, while worries persisted over the economic impact of President Donald Trump's trade policies.

U.S. equity funds saw net purchases of $4.67 billion during the week, although the strong inflows from February, which totaled about $9 billion, have tapered off with a combined outflow of $4.81 billion in the first two weeks of March.

"We recommend investors embrace diversification and stay invested despite ongoing volatility ... see continued positive potential returns in the United States, AI, as well as power-and-resources-linked equities into year-end," said Mark Haefele, chief investment officer at UBS Global Wealth Management.

"Investors looking to navigate a tense geopolitical environment should ensure their portfolios are well diversified with quality bonds, gold and alternative investments."

U.S. large-cap funds received $8.78 billion, the fifth consecutive weekly net inflow.

Multi-cap funds also witnessed $479 million worth of additions, though investors ditched small-cap and mid-cap funds to the tune of $1.32 billion and $1.22 billion, respectively.

Sectoral funds, meanwhile, witnessed the second straight week of outflows, with net sales worth $3.25 billion. Investors divested tech, communication services and consumer staples sector funds to the tune of $1.59 billion, $423 million and $340 million, respectively.

U.S. bond funds were in demand for the tenth successive week, grossing in a net $8.44 billion during the week.

Short-to-intermediate government and treasury funds drew a robust $5.39 billion, the largest weekly net inflow since March 2023. Meanwhile, loan participation funds witnessed a notable $1.13 billion worth of net withdrawals following 10 weekly inflows in a row.

U.S. money market funds, meanwhile, saw $14.62 billion worth of net sales, the second weekly outflow in six weeks.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Shounak Dasgupta)