In May 2025, equity mutual fund inflows dropped sharply by 22% to Rs 19,013 crore, compared to Rs 24,799 crore in April. This decline signals growing investor caution amid increasing market volatility and geopolitical uncertainties.
Reasons Behind the Dip
According to the Association of Mutual Funds in India (AMFI), the decline in equity fund inflows is attributed to profit booking and a cautious stance by retail investors. Many investors have been rebalancing their portfolios in light of the recent market highs and global economic concerns.
Breakdown by Category
Among the equity mutual fund categories, large-cap funds saw moderate interest, while small-cap and mid-cap funds recorded lower inflows than previous months. Sectoral and thematic funds, however, continued to attract attention due to emerging opportunities in areas like infrastructure and technology.
- Small-cap funds: Rs 2,724 crore inflow (down from Rs 3,857 crore in April)
- Mid-cap funds: Rs 1,687 crore (vs Rs 2,652 crore in April)
- Large-cap funds: Rs 1,316 crore
- Flexi-cap funds: Rs 2,416 crore
- ELSS (Tax-saving funds): Rs 823 crore
SIPs Remain Strong
Despite the dip in lump-sum investments, Systematic Investment Plans (SIPs) remained strong with inflows crossing Rs 20,000 crore, showcasing long-term investor confidence in mutual funds as a wealth-building tool.
Industry Expert Views
Market experts suggest that the fall is temporary and reflects short-term risk aversion. “Equity markets have seen high valuations, prompting many to take profits and wait for better entry points,” said a Mumbai-based fund manager.
Outlook for the Coming Months
With elections over and the RBI expected to maintain a neutral monetary stance, mutual fund advisors believe inflows will likely stabilize. Renewed interest may emerge as clarity improves on global interest rates and domestic policy directions.
Conclusion
The 22% fall in equity fund inflows in May 2025 underlines investor caution in a dynamic market environment. While lump-sum investments declined, SIP inflows remain a bright spot, indicating faith in long-term equity growth.
