PMS flows see sharpest monthly collapse of FY26 as HNIs turn cautious; derivatives, discretionary mandates take the biggest hit

PMS flows down for FY26

The Portfolio Management Services (PMS) industry recorded one of its steepest monthly slowdowns in FY26, with net inflows falling 92% month-on-month in September 2025 to just ₹1,139 crore, sharply down from ₹14,789 crore in August. This dramatic reversal came even as total AUM climbed to a fresh all-time high, underscoring the widening gap between mark-to-market AUM expansion and actual investor flows.

Strategists say the AUM bump was largely optical, led by mark-to-market gains. “Actual flows into PMS have been much lesser if you strip-off the mark-to-market gains of 5-6%,” said one market strategist.

APMI’s September Compendium shows that the month’s ₹30,351 crore of gross inflows was heavily supported by EPFO-linked mandates, which contributed ₹8,449 crore or 28%, masking weak HNI activity. PF/EPFO AUM rose 2%, adding ₹54,700 crore, while non-PF/EPFO assets contracted 1.9%, a reduction of nearly ₹21,000 crore.

Discretionary PMS — the clearest barometer of HNI sentiment — saw the sharpest deterioration. Inflows fell to ₹19,290 crore in September from ₹33,730 crore in August, while redemptions jumped to ₹16,500 crore, resulting in the biggest discretionary outflow of FY26. Prudent Equity’s Diwakar Rana said the divergence between high AUM and weak flows was behavioural. “The surge in outflows suggests behavioural caution as markets get more volatile and valuation concerns arise. We feel it should be viewed as a transient occurrence rather than a permanent one.”

Choice Wealth’s Akshat Garg said even record AUM masked underlying weakness. “PMS assets hit a fresh all-time high at ₹36.28 lakh crore. But once you strip out the ~2% rally in benchmark indices, actual inflows turn negative. PMS saw net outflows of ~₹24,000 crore. The new AUM peak was lifted almost entirely by rising stock prices, not by new HNI money coming in.”

Non-discretionary PMS, typically steadier due to corporate and treasury mandates, also cooled. Net flows fell to ₹2,137 crore, down sharply from over ₹3,200 crore in August, as redemptions outpaced inflows.

Segment-level trends echoed the broader risk-off mood. Corporate PMS AUM dropped 6% during the month — an unusually steep fall for a normally stable category. Non-resident AUM rose 3% after August’s contraction, partly offsetting domestic weakness. Across asset classes, derivatives AUM plunged 25.6%, the biggest month-on-month decline, while equity AUM rose 2.5%, lifted mostly by market gains. Mutual fund and plain debt allocations inched up 2.8% and 0.6%, respectively.

Client additions slowed as well. PMS platforms added 3,490 new accounts, taking the total base to 2.1 lakh, but monthly additions flattened. Discretionary client numbers are up 15% year-on-year, but the momentum has cooled, while advisory clients fell 15% year-on-year. “Client additions slowed to 1.4%, down from the usual 2–3% earlier in the year,” said Garg. “Wealthy investors clearly turned cautious. Many booked profits, while others diverted money abroad amid stretched valuations and record FPI selling.”

The sharp correction in flows, especially among HNIs and corporates, combined with the heavy reliance on EPFO inflows, signals that September’s PMS AUM high was driven less by conviction and more by markets doing the heavy lifting, along with mandatory commitments.