Equity mutual fund inflows hit 13-month low; large, mid, small-caps all down

MUMBAI: Equity mutual fund inflows fell to a 13-month low in May, with net additions dropping to Rs 19,013 crore, down 21.7% from April. This marked the fifth straight month of declining equity fund inflows, reflecting investor caution amid high valuations and global uncertainty.Despite the drop, retail participation through SIPs continued to rise. SIP inflows hit a record Rs 26,688 crore in May, marginally above April's Rs 26,632 crore. The number of contributing accounts rose to nearly 8.6 crore, with the total number of SIPs touching around 9.1 crore. At the same time, 59 lakh accounts were closed or matured, indicating turnover within the system.

According to data released by industry body Amfi, total industry assets under management rose to Rs 72.2 lakh crore in May, up from Rs 70 lakh crore in April, supported by market performance.

The Nifty 50 gained 1.7% in May, while mid-cap and small-cap indices rose 6.1% and 8.7%, respectively, helped by foreign portfolio investor flows and strong performance in sectors such as defence.Overall, the mutual fund industry experienced an infusion of over Rs 29,000 crore in May compared to Rs 2.77 lakh crore in the preceding month.However, inflows into large-cap, mid-cap, and small-cap funds all fell. Large-cap funds received Rs 1,250 crore, down from Rs 2,671 crore in April.

Mid-cap fund inflows dropped to Rs 2,808 crore from Rs 3,313 crore, while small-cap funds attracted Rs 3,214 crore compared to Rs 3,999 crore earlier. Equity-linked saving schemes and value funds recorded net outflows of Rs 678 crore and Rs 92 crore, respectively. Flexi-cap funds attracted the highest equity inflows in May at Rs 3,841 crore. The shift reflects investor preference for more flexible strategies and caution around overvalued segments.

Passive and hybrid fund categories also gained, pointing to diversification in investment approaches. Debt mutual funds saw a sharp reversal, with outflows of Rs 15,908 crore in May after Rs 2.2 lakh crore inflows in April. Redemptions came mainly from short-term categories, influenced by changing interest rate expectations and RBI's neutral stance. Corporate bond funds attracted Rs 11,980 crore, the highest since March 2023, as institutional investors chased higher yields in AA+ and above-rated paper.

Bank liquidity and shorter maturities boosted demand.Foreign portfolio investors bought $2.3 billion worth of Indian shares in May, the highest since Sept 2024, contributing to equity market gains. Mutual funds, however, held Rs 2.15 trillion in cash in April, suggesting a wait-and-watch approach toward deployment.The rise in SIP inflows and accounts highlights steady retail commitment despite volatility. As digital adoption increases and mutual funds expand beyond larger cities, long-term structural participation appears stable. Yet, market volatility, high valuations, and geopolitical risks are likely to keep inflows uneven in the near term.