Mutual fund investors continued to show confidence in systematic investment plans (SIPs) during the month of May, even as broader fund inflows saw a slowdown.
SIP contributions remained above the Rs 30,000 crore threshold for the third month in a row, showing the resilience of long-term retail participation in the market. Data released by the Association of Mutual Funds in India for May showed SIP inflows at Rs 30,954 crore, slightly lower than Rs 31,115 crore recorded in April. The month-on-month decline was marginal at around 1 per cent. However, compared with the same month last year, SIP investments registered a healthy 16 per cent increase from Rs 26,688 crore. While SIP contributions remained stable, overall investments into equity mutual funds dropped considerably during the month. Net inflows into equity-oriented schemes stood at Rs 22,907 crore in May, down nearly 40 per cent from Rs 38,440 crore in April. Despite the monthly slowdown, equity funds continued to attract stronger investor interest compared to a year ago. Net inflows were 20 per cent higher than the Rs 19,013 crore recorded in May 2025, indicating sustained long-term confidence in equity markets. Debt mutual funds experienced a significant change in investor behaviour during May. The category reported net outflows of Rs 96,948 crore, a stark contrast to the substantial inflows of Rs 2.47 lakh crore seen in April. Meanwhile, Credit risk funds were the only segment to buck the trend, attracting net inflows of Rs 49.46 crore. Among the categories experiencing the largest withdrawals, liquid funds led the decline with outflows of Rs 29,680 crore. Money market funds and overnight funds followed, recording net redemptions of Rs 24,691 crore and Rs 15,524 crore, respectively. Hybrid mutual funds also saw a moderation in investor inflows. Net investments into the category declined to Rs 10,560 crore in May, almost half of April’s Rs 20,565 crore. Gold ETFs Saw Weak Participation Gold ETFs moved into negative territory, recording net outflows of Rs 725 crore after receiving Rs 3,040 crore in April. Other ETFs also witnessed net withdrawals of Rs 620 crore. On the other hand, index funds attracted Rs 943 crore, while the overseas fund of funds received Rs 763 crore. At the industry level, open-ended mutual fund schemes reported net outflows of Rs 62,848 crore in May compared with net inflows of Rs 3.26 lakh crore in the previous month. As a result, the mutual fund industry's assets under management (AUM) edged lower to Rs 81.38 lakh crore at the end of May from Rs 81.71 lakh crore in April. Speaking about the numbers, Shashwat Singh, Fundamental Analyst, Bajaj Brokin, said, "May 2026 witnessed a distinct cooling in mutual fund investment activity, with actively managed equity fund inflows slumping by 40.4 per cent m-o-m to Rs 229.07 bn - the lowest monthly level recorded this calendar year. This fall was broad-based, with significant declines across large-cap, mid-cap, and small-cap segments, while flexi-cap and sectoral thematic funds experienced even sharper contractions compared to April 2026." "Despite this moderation in lump-sum equity flows, Systematic Investment Plan (SIP) contributions displayed remarkable resilience. At Rs 309.54 bn, SIP inflows saw only a marginal 0.5 per cent dip from April 2026, marking the third consecutive month that this steady retail-driven channel has held above the Rs 300 bn crore threshold, thereby sustaining the underlying structural uptrend in retail participation," he added. Ankur Punj, MD & Business Head at Equirus Wealth, noted, "The moderation in equity mutual fund inflows reflects a more cautious investor sentiment amid heightened geopolitical uncertainty and increased market volatility. Concerns over global developments, particularly tensions in the Middle East and fluctuating crude oil prices, have led many investors to adopt a wait-and-watch approach rather than make fresh allocations. While near-term sentiment may remain subdued, the underlying structural growth story for Indian equities remains intact, and disciplined long-term investing continues to be the most effective strategy for wealth creation."
