Investor inflows into equity mutual funds slowed sharply in May 2026 amid heightened geopolitical tensions and volatile commodity prices. However, robust SIP contributions and continued positive flows highlighted the resilience of India's retail investors.

Equity mutual funds recorded net inflows of ₹22,907 crore in May, down nearly 40% from ₹38,440 crore in April, according to data released by the Association of Mutual Funds in India (AMFI). Despite the monthly decline, inflows were still 20% higher than ₹19,013 crore recorded in May 2025, marking the 63rd consecutive month of positive equity inflows.

West Asia and impact

The moderation in flows came as uncertainty surrounding the US-Iran peace negotiations and surging crude oil prices dampened investors' appetite for risk.

"The lower inflows is due to extreme volatility in the markets as crude hovers around $100 a barrel, which has prompted near-term caution among investors," said Venkat Chalasani, Chief Executive of AMFI.

The mutual fund industry's net assets under management (AUM) declined marginally to ₹81.58 lakh crore in May from ₹81.92 lakh crore in April, while SIP contributions remained strong at ₹30,953.83 crore.

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Small and mid-cap funds shine

Among equity categories, flexi-cap funds emerged as the most preferred segment, attracting ₹5,176 crore. Small-cap funds received inflows of ₹4,945.57 crore, down 28% from April, while mid-cap funds garnered ₹4,385.06 crore, a 33% decline on a monthly basis. Large-cap funds attracted ₹1,592.93 crore compared with ₹2,524.6 crore in April.

According to Feroze Azeez, Joint CEO of Anand Rathi Wealth, nearly two-thirds of total equity inflows were concentrated in flexi-cap, small-cap and mid-cap funds, indicating that investors continue to diversify across market segments despite volatility.

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"Indian investors are becoming more disciplined and are looking at equities as a long-term wealth creation opportunity," Azeez said, noting that May SIP inflows were nearly 16% higher than a year earlier.

Debt funds outflows

Debt mutual funds experienced a sharp reversal in May, posting net outflows of ₹96,948 crore compared with inflows of ₹2.47 lakh crore in April.

Liquid funds led the outflows with ₹29,680 crore, followed by money market funds, which saw withdrawals of ₹24,691.74 crore. Corporate bond funds also reported net outflows of ₹7,009.94 crore.

Credit risk funds were the only debt category to remain in positive territory, attracting net inflows of ₹49.5 crore.

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Hybrid and passive funds moderate

Hybrid funds recorded inflows of ₹10,560.24 crore in May, almost 49% lower than the ₹20,565.2 crore received in April. Arbitrage funds attracted ₹5,697 crore, while multi-asset allocation funds received ₹3,928 crore.

Meanwhile, inflows into index funds, gold ETFs and other exchange-traded funds plunged 98% month-on-month to ₹361.99 crore. Gold ETFs witnessed net outflows of ₹725.04 crore after enjoying 12 straight months of positive inflows.

Azeez said investors may be booking profits after gold prices touched record highs and reallocating money toward equities following recent market corrections.

Long-term confidence

Vaibhav Chugh, CEO of Abakkus Mutual Fund, described the moderation in inflows as a "healthy consolidation" rather than a reversal in investor sentiment.

He said the steady SIP contributions of over ₹30,900 crore reflect the growing maturity of retail investors and reinforce the structural strength of domestic participation.

"While near-term uncertainties persist, the underlying fundamentals of investor participation and confidence in the mutual fund industry remain strong. We continue to remain cautiously optimistic as we look ahead," Chugh said.

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