Net mutual fund (MF) inflows into active equity schemes plunged 40 per cent month-on-month (M-o-M) in May, as weaker lump-sum investments and higher redemptions weighed on flows. Gross inflows into equity schemes fell 18 per cent M-o-M to ₹57,604 crore, while redemptions rose 9 per cent to ₹34,696 crore, dragging net inflows down to a one-year low of ₹22,908 crore. This came despite gross systematic investment plan (SIP) investments remaining largely stable. SIP inflows stood at ₹30,954 crore in May, down marginally from ₹31,115 crore in April.

According to experts, the decline in net inflows can be credited to volatility triggered by an uncertain global environment. “The lower inflows could be ascribed to near-term caution among investors amid significant market volatility. Elevated crude oil prices and broader macroeconomic headwinds have weighed on sentiment. Currency depreciation also contributed to the uncertainty,” said Sanjay Agarwal, senior director, CareEdge Ratings.

Benchmark indices Nifty 50 and Sensex ended May in the red as global uncertainties triggered fresh volatility after a sharp rise in April. Net inflows into equity funds slowed across categories. Flexicap funds remained the biggest contributor to net inflows even as investments into the category halved.

“Flexicap, the industry’s bellwether, saw inflows halve from ₹10,148 crore to ₹5,176 crore. Thematic and value/contra categories took the biggest hit, as they always do when sentiment softens. But mid and smallcap funds held their ground,” said Suranjana Borthakur, head of distribution and strategic alliances, Mirae Asset Investment Managers (India).

Mid and smallcap funds, which attract a larger share of SIP inflows, saw around a 30 per cent decline in net inflows. The slowdown in net inflows was more pronounced in other categories. Net inflows into hybrid schemes nearly halved from April levels to ₹10,560 crore, while inflows into passive and other schemes (index funds, exchange-traded funds, and overseas fund of funds) slumped 98 per cent to just ₹362 crore.

Debt funds, which had seen net inflows of ₹2.47 trillion in April, recorded net outflows of ₹96,949 crore in May, largely due to reversals in liquid, money market, and corporate bond funds. “There has been an across-the-board drop in collections in MFs. Investors appear to be fatigued by markets that have largely moved sideways over the past two years. SIP inflows have also declined for the past two months. The trend could lead to more SIP stoppages. The next two months will be critical for Indian markets as we assess the impact of the monsoon and the first-quarter (April-June/Q1) results for 2026-27,” said Juzer Gabajiwala, director, Ventura.

The industry, however, does not see cause for concern as SIP inflows remain strong. “The MF industry’s growth continues to be powered by robust SIP inflows, which stood at ₹30,954 crore in May. The number of contributing SIP accounts remained steady at 96.4 million, reflecting the growing preference for MFs as a structured approach to wealth accumulation. Given India’s strong economic fundamentals, our focus remains on empowering investors with the knowledge to stay committed to their long-term financial goals,” said Venkat Chalasani, chief executive, Association of Mutual Funds in India.