Equity MF inflows hit 13-month low in May despite market recovery

Business Standard

a day ago

Inflows into equity mutual fund (MF) schemes declined for the fifth consecutive month in May, falling to their lowest level in 13 months at Rs 19,013 crore. This came even as gross inflows through systematic investment plans (SIPs) surged to a record high of ₹26,688 crore.
The fall in net inflows was largely due to a 16 per cent month-on-month increase in redemptions. Investors pulled out ₹37,591 crore in May, the highest since July 2024, according to data released by the Association of Mutual Funds in India (Amfi).
Higher outflows, experts said, were driven by profit booking amid geopolitical and trade uncertainties.
'The slowdown 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 domestic equities following sharp rallies in previous months and stretched valuations,' said Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Research India.
India–Pakistan tensions and heightened global market volatility may also have played a role, according to experts.
'Equity net sales have seen a sharp downtick largely on account of higher redemptions. This was probably due to the war-like situation at the beginning of the month, which led to sentiment being cautious,' said Akhil Chaturvedi, Executive Director and Chief Business Officer, Motilal Oswal AMC.
The equity market saw recovery for the third straight month in May, with the benchmark Nifty 50 index rising 1.7 per cent.
According to experts, some investors who had entered near market peaks may be using the recovery to exit.
'Many investors tend to refrain from redeeming when the value of their investment drops significantly below the peak value they have seen in the past— influenced by 'anchoring bias',' said Nilesh D Naik, Head of Investment Products, Share.Market.
'As the market started recovering from March, redemptions have gradually increased. If the market continues to remain strong, we could see this trend for another month or so, but stronger market sentiment could subsequently lead to increased gross inflows, thus normalising the ratio,' he added.
While redemptions rose, fresh investments remained steady, buoyed by record SIP inflows. Investments through SIPs rose marginally to a new high of ₹26,688 crore.
Despite subdued net inflows, mark-to-market gains from the market recovery contributed to a significant rise in the total assets managed by the MF industry.
'The MF industry has crossed ₹70 trillion in assets under management, reaching new highs driven by resilient retail participation and consistent SIP inflows. The growth of SIPs is particularly encouraging, indicating a shift towards disciplined, long-term investment,' said Venkat N Chalasani, Chief Executive, Amfi.
Among key equity fund categories, the sharpest decline was seen in largecap funds, with inflows more than halving to ₹1,250 crore. Mid-cap and small-cap funds saw inflows fall by 15 per cent and 20 per cent to ₹2,809 crore and ₹3,214 crore, respectively.