War-wary, May equity MF inflows fall 40% to year low

Equity mutual fund inflows fell in May, dropping 40% to a 12-month low as investors scaled back fresh lumpsum allocations amid growing concerns over the fallout of the West Asia conflict. About 22,908 crore flowed into such schemes in May, down from 38,440 crore in April, marking the steepest monthly decline since May 2023, according to data from the Association of Mutual Funds in India (AMFI).

Monthly flows through systematic investment plans (SIPs), the MF industry’s mainstay, stood at 30,954 crore, marginally lower than April’s 31,115 crore.

Sensitive to Sentiment
It marks the second straight month of lower contributions. The SIP book hit an all-time high of 32,087 crore in March.

Total assets under management eased to 81.58 lakh crore at the end of May, compared with 81.92 lakh crore in April.

Market participants attributed the slowdown in inflows to heightened geopolitical uncertainty and volatility.

“Concerns over global developments, particularly tensions in the Middle East and fluctuating crude oil prices, have led many investors to adopt a wait-and-watch approach rather than make fresh allocations,” said Ankur Punj, managing director, Equirus Wealth.Investors deferred their lumpsum investments into equity mutual funds as elevated crude oil prices, a weakening rupee and intermittent market corrections have dented near-term visibility. Unlike SIPs, lumpsum investments are more sensitive to sentiment, with investors choosing to time their entry rather than commit capital amid heightened volatility.

The Nifty declined more than 2% in May, with crude prices hovering around the $100-a-barrel mark, adding to inflation concerns.

Among equity categories, flexi-cap funds saw the highest inflows at 5,176 crore, though this was 49% lower than April levels. Small-cap and mid-cap funds attracted 4,946 crore and Rs 4,385 crore, respectively, with inflows down 33% and 28%, in that order.

In contrast, gold exchange-traded funds (ETFs) saw net outflows of 725 crore in May, the first monthly outflow in 13 months, following a steady moderation in inflows through the year after record subscriptions earlier in 2026.

Debt mutual funds witnessed a reversal, recording net outflows of 96,949 crore in May, compared with inflows of 2.47 lakh crore in April, making them the primary drag on overall industry flows.

“Over 70% of the outflows came from the shorter end of the curve, particularly from three categories — liquid, money market and overnight funds — which could be attributed to seasonality of corporate treasury management and tax cycles,” said Sanjay Agarwal, senior director, CareEdge Ratings.

Hybrid funds saw inflows moderate to 10,560 crore from 20,565 crore in April, while new fund launches remained muted. The industry saw 13 new fund offers in May, which collectively mobilised 471 crore, nearly half the amount raised in the previous month.