Equity fund inflows fall 22% to hit one-year low of Rs 19,013 crore in May: AMFI data

In May, Sensex rose 1.51 percent, while Nifty 50 jumped 1.71 percent.

Net inflows into equity mutual funds fell 21.66 percent to a one-year low of Rs 19,013.12 crore in May from the previous month, data released by the Association of Mutual Funds of India (AMFI) on June 10 showed.

However, thanks to mark-to-market (MTM) gains in equities, the overall net assets under management (AUM) of the mutual fund industry rose to Rs 72.20 lakh crore for the first time against Rs 69.99 lakh crore in April. Overall, the mutual fund industry saw net inflows of Rs 29,108.33 crore in May.

After May, net inflows into open-ended equity funds have stayed in the positive zone for the 51st month in a row, starting from March 2021.

"The Indian mutual fund industry has crossed Rs 70 lakh crore in AUM, reaching new highs, driven by resilient retail participation and consistent SIP inflows. The growth of SIP is particularly encouraging, indicating a shift towards disciplined, long-term investment. Equity inflows moderated to Rs 19,013 crore this month, reflecting cautious investor sentiment amidst market volatility. Such phases often witness a natural reallocation towards hybrid and arbitrage schemes, offering a more balanced approach during uncertain times," said N Chalasani, Chief Executive, AMFI.

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The slump in inflows comes despite the market recovery. In May, the BSE benchmark Sensex rose 1.51 percent and NSE Nifty50 jumped 1.71 percent.

Meanwhile, the monthly inflow into mutual funds through the Systematic Investment Plan (SIP) route rose by 0.21 percent to a fresh high of Rs 26,688 crore in May, latest data from AMFI showed on June 10, despite a drop in inflows into the equity category.

"The broader slowdown in equity inflows can be attributed to a mix of factors: a less buoyant equity market in May compared to April, concerns around global economic headwinds, and a possible consolidation phase or profit booking in the domestic equities following sharp rallies in the previous months and stretched valuations. Also, heightened global volatility—stemming from geopolitical tensions with India launching Operation Sindoor against Pakistan and concerns around global inflation, contributed to a risk-off sentiment among some investors," said Himanshu Srivastava – Associate Director- Manager Research, Morningstar Investment Research India.

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Equity funds

In the equity segment, inflows into the Largecap Fund category crashed 53.19 percent to Rs 1,250.47 crore. Further, smaller caps also saw tapering of demand. Net inflows into smallcap funds slumped 19.64 percent to Rs 3,214.21 crore, while midcap funds inflows were down 15.25 percent to Rs 2,808.68 crore in May.

Notably, multicap and flexicap funds, which invest across largecap, midcap and smallcap stocks, saw divergent trends. Inflows into multicap funds that have to invest at least 25 percent each in largecap, midcap and smallcap stocks saw 17.54 percent rise in inflows to Rs 2,999.29 crore.

On the other hand, flexicap funds, which have no restrictions on investments across different market capitalizations, saw 30.68 percent dip in inflows to Rs 3,841.32 crore during May.

“While smallcap funds are getting lower allocations due to valuation concerns. Flexicap allocation by investors allows the fund managers to allocate across the market wherever the opportunities might lie. Sector funds are still getting positive traction, but investors should be cautious while allocating, being conscious of valuations in the popular sectors. If they pay attention to the PE (price-to-earnings) ratios of the funds they are allocating to, it will help rational capital allocation and lower chances of sectoral or thematic bubbles,” said Vikas Gupta, CEO and Chief Investment Strategist at OmniScience Capital.

Debt funds

In the fixed-income segment, debt mutual funds saw net outflows of Rs 15,908.48 crore against inflows of Rs 2.19 lakh crore in April.

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In the fixed income category, Liquid Funds saw net outflows of Rs 40,205.36 crore, while Overnight Funds also saw net selling of Rs 8,120.03 crore during May.

Meanwhile, Corporate Bond Fund saw net buying of Rs 11,983.35 crore, while Money Market Fund saw net inflows of Rs 11,223.08 crore.

Hybrid funds

Hybrid funds, that invests across debt, equity and commodities, saw 45.74 percent rise in net inflows to Rs 20,765.05 during May.

Arbitrage funds saw 33.18 percent rise in net buying to Rs 15,701.97 crore during the month, while Multi Asset Allocation Fund category also saw 39 percent spike in inflows to Rs 2,926.80 crore.

The Dynamic Asset Allocation (DAA)/Balanced Advantage Fund (BAF) category also saw 28.92 percent jump in inflows to Rs 1,136.12 crore.

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“What’s particularly encouraging is the rise in hybrid categories — especially arbitrage, BAFs, and multi-asset funds — indicating that investors are using these as strategic tools to stay invested while managing short-term volatility. Arbitrage funds, in particular, are being seen as a safe space to temporarily park funds ahead of further deployment. Overall, investors appear to be making balanced and thoughtful allocation decisions across asset classes, aligned with their risk appetite and investment horizons,” said Suranjana Borthakur, Head of Distribution & Strategic Alliances, Mirae Asset Investment Managers (India).

Gold funds

Gold exchange-traded funds (ETFs) recorded a net inflow of Rs 291.91 crore in May, marking an improvement from the marginal outflow of Rs 5.82 crore in April.

Flows into the category had remained muted over the past two months, following modest outflows in March as well.

The renewed traction in May signals a gradual return of investor interest, likely driven by resilient gold prices and sustained global uncertainties that reinforce gold’s appeal as a strategic hedge. The uptick also shows that investors are regaining confidence in gold, as it continues to offer stability amid mixed signals from equity and bond markets.

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"The relative stability in gold prices through May have provided a more attractive entry point for investors looking to build or rebalance allocations toward safer assets. The resurgence in flows also highlights the growing role of Gold ETFs in strategic asset allocation, especially as investors seek to manage risk in an increasingly uncertain investment environment. While inflows are yet to reach the levels seen earlier in the year, the trend suggests a gradual and measured return of interest in gold, underpinned by its long-term diversification benefits," said Nehal Meshram, Senior Analyst – Manager Research, Morningstar Investment Research India.