Equity Flows Cool Amid Market Swings as Debt Outflows Hit Near ₹1 Lakh Crore, Yet SIP Stability Holds Firm

Equity Flows Cool Amid Market Swings as Debt Outflows Hit Near ₹1 Lakh Crore, Yet SIP Stability Holds Firm​

Mutual fund investors faced a volatile May, marked by sharp swings in equity markets and significant outflows from debt categories. Despite these headwinds, systematic investment plan (SIP) contributions demonstrated remarkable resilience, providing a solid foundation for the industry amidst persistent global uncertainties. This trend underlines the sustained commitment of retail participants to long-term wealth accumulation through disciplined investing.

Equity Inflows Drop Sharply as Sectoral Funds Underperform​

Equity mutual funds attracted net inflows of ₹22,908 crore in May, a significant slowdown compared to April's ₹38,440 crore. This figure represented a 40 percent decline and marked the lowest monthly inflow since May 2025. The moderation was mainly driven by performance dips in flexi-cap and sectoral funds.

Flexi-cap fund inflows fell sharply to ₹5,176 crore from ₹10,149 crore in April, contributing nearly one-third of the overall equity decline. Sectoral and thematic funds also saw a steep drop in inflows, reaching just ₹648 crore from close to ₹1,994 crore the previous month.

Industry experts maintained a constructive view on retail stability. Himanshu Srivastava, Principal at Morningstar Investment Research India, noted that despite the moderation, "The fact that equity funds continued to attract over ₹22,000 crore despite heightened uncertainty underscores that domestic investor participation remains resilient and structurally intact."

Debt Funds Experience Massive Outflows as Risk Appetite Moderates​

In a sharp reversal, debt mutual funds registered net outflows amounting to ₹96,949 crore in May. This substantial decline contrasted sharply with the inflows recorded by the category in April. The industry's total assets under management (AUM) for debt funds subsequently declined 4.6 percent month-on-month, settling at ₹18.25 lakh crore.

Liquid funds accounted for the largest redemptions, witnessing outflows of ₹29,681 crore. Money market funds and overnight funds also saw significant withdrawals, with losses recorded at ₹24,692 crore and ₹15,525 crore respectively. Low-duration funds registered an outflow of ₹9,400 crore.

Precious Metal ETFs Snap Inflow Streak Amid Profit Booking Concerns​

Precious metal ETFs experienced a downturn in May, recording net outflows of ₹725 crore. This reversal ended a streak of positive flows that had lasted one year. However, the assets under management for Gold ETFs continued to climb, reaching ₹1.85 lakh crore from ₹1.78 lakh crore in April due to underlying gold price gains.

Silver ETFs were also under pressure, recording net outflows of ₹2,133 crore and extending their consecutive outflow streak to four months. Despite the withdrawals, silver ETF assets increased slightly to approximately ₹86,000 crore from ₹82,000 crore based on mark-to-market gains.

Nehal Meshram, Senior Analyst at Morningstar Investment Research India, suggested that this reversal was likely driven by a combination of profit booking following the earlier rally in gold prices and shifts in investor risk appetite. She noted that the pattern indicated significant earlier allocations were tactical and sensitive to short-term macro cues.

SIP Contributions Show Resilience Amid Sectoral Weakness​

The backbone of stability for the mutual fund industry proved to be systematic investment plans (SIPs). Monthly SIP contributions stood at a robust ₹30,954 crore in May, only marginally lower than the record figure of ₹31,115 crore reported in April. This performance highlights the growing structural reliance on market-linked products for wealth creation.

The number of contributing SIP accounts remained strong at 9.64 crore, and the total number of SIP accounts rose to 10.47 crore. Varun Gupta, CEO of Groww Mutual Fund, stated that this data suggested moderation rather than a fundamental shift in investor behaviour, noting the continued meaningful allocations into mid-cap, small-cap, and flexi-cap funds.

Retail Footprint Grows as Discipline Strengthens Market Participation​

The overall retail presence within the mutual fund industry continues to expand despite market volatility. Total mutual fund folios increased by 12.56 lakh in the month, reaching 27.66 crore. Retail folios across equity, hybrid, and solution-oriented schemes rose to 21.10 crore from 21 crore in April.

Retail assets under management (AUM) in these categories also saw growth, climbing to ₹47.91 lakh crore from ₹47.42 lakh crore in the previous month. SIP assets reached ₹17.12 lakh crore, constituting nearly 21 percent of the industry's total AUM, signaling a steady trend of household savings moving towards structured market investments.