Key facts
- Equity mutual fund inflows declined 40% to ₹22,908 crore in May.
- This is the lowest inflow level seen in 12 months.
- Systematic Investment Plan (SIP) flows remained robust, with only a slight decrease.
- Geopolitical concerns, particularly in the Middle East, are cited as a primary reason for the slowdown.
- Debt mutual funds experienced significant net outflows of ₹96,949 crore.
Equity mutual fund inflows saw a significant 40% decline in May, reaching a 12-month low of ₹22,908 crore. This drop, the steepest since May 2023, was driven by investors reducing lump-sum investments amid escalating concerns over the West Asia conflict and its potential impact on crude oil prices and inflation.
Despite the slowdown in lump-sum investments, which are more sensitive to market sentiment and volatility, Systematic Investment Plan (SIP) flows remained largely stable, totaling ₹30,954 crore for the month, only marginally lower than April's figure. The overall assets under management for the industry eased slightly to ₹81.58 lakh crore at the end of May.
Market participants attributed the cautious approach to heightened geopolitical uncertainty and fluctuating crude oil prices, prompting a wait-and-watch strategy among investors. Elevated crude prices, a weakening rupee, and intermittent market corrections have dented near-term visibility, leading investors to defer lump-sum commitments.
Among equity categories, flexi-cap funds attracted the highest inflows at ₹5,176 crore, though this was 49% lower than the previous month. Small-cap and mid-cap funds also saw reduced inflows. In contrast, gold exchange-traded funds (ETFs) experienced their first monthly outflow in 13 months, totaling ₹725 crore.
Debt mutual funds witnessed a substantial reversal, recording net outflows of ₹96,949 crore in May, a significant shift from April's inflows. Over 70% of these outflows originated from shorter-term debt categories like liquid, money market, and overnight funds, potentially due to corporate treasury management and tax cycles. Hybrid funds also saw moderated inflows.