Equity Fund Inflows Tumble; Flexi Cap's Sharp Drop Drains Nearly A Third of Sector Growth

Equity Fund Inflows Tumble; Flexi Cap's Sharp Drop Drains Nearly A Third of Sector Growth​

Net inflows into equity mutual funds saw a significant moderation in May, as investor allocations softened across most categories. The monthly total of ₹23,587 crore marked a substantial decline from the ₹39,612 crore recorded in April. Despite this downturn, overall inflows remained 24% higher compared to the ₹19,013 crore witnessed in May 2025.

Overall Equity Inflows Decline Amid Moderating Allocations​

The broader slowdown was evident across multiple segments of the market. For instance, Mid Cap funds and Small Cap funds both experienced noticeable declines in their monthly inflows. Collectively, Flexi Cap, Mid Cap, and Small Cap categories accounted for ₹9,083 crore, which represents nearly 57% of the overall decline observed between April and May.

The category-specific downturn was most pronounced in Flexi Cap funds. These funds saw net inflows fall by ₹4,973 crore, which is nearly a third of the total equity fund inflow reduction during the period. Net inflows into the Flexi Cap category dipped to ₹5,175 crore from ₹10,148 crore in April.

Flexi Cap Funds Lead The Slowdown Inflows​

Flexi Cap funds' decline was especially notable given their strong momentum earlier in the year. These funds had successfully attracted over ₹10,000 crore in both March and April. Consistently, they managed to garner more than ₹6,900 crore every month since January.

Even after this significant drop, Flexi Cap remains a robust area for fresh capital. The category still accounted for nearly 22% of the total equity inflows in May. Looking at a year-on-year basis, however, inflows into this segment registered a solid increase of 34.7%, reaching ₹3,841 crore compared to May 2025.

Performance Breakdown Across Specific Categories​

While Flexi Cap faced headwinds, other specialized categories showed resilience. Small Cap funds saw their inflows decrease by ₹1,940 crore, settling at ₹4,946 crore for the month. However, investor interest in this segment remained strong, with inflows up 53.9% compared to a year prior.

Similarly, Mid Cap funds saw a decline of ₹2,170 crore, bringing their inflows down to ₹4,385 crore. Nevertheless, these categories attracted approximately 21% and 19%, respectively, of the total equity inflows for May. In terms of yearly comparison, both Small Cap and Mid Cap inflows were up significantly by over 50%.

Broader Market Segments and Thematic Cautiousness​

Other diversified investment themes also moderated their growth. Large & Mid Cap funds received ₹3,278 crore, marking a decline of 27% from the preceding month. Multi Cap funds attracted ₹2,291 crore, which represents a 23.6% decrease. Focused Funds saw inflows ease to ₹830 crore in May.

Investor appetite for highly concentrated thematic strategies cooled sharply. Sectoral and thematic funds recorded net inflows of ₹648 crore. This figure reflects a nearly 67% drop from the previous month, indicating a cautious market approach toward concentrated bets due to the lack of major new fund offers.