Flows to Indian equity mutual funds drop to one-year low in April

Inflows into India’s equity mutual funds fell for the fourth consecutive month in April, reaching their lowest in a year amid market volatility triggered by U.S. tariff concerns, data showed on Friday.

Net inflows fell 3.24% month-on-month in April to about 242.69 billion rupees ($2.83 billion), data from the Association of Mutual Funds in India (AMFI) showed.

However, expectations of India’s economic resilience to tariffs, along with hopes of a trade deal and favourable valuations helped limit the decline, while buying extended into the 50th straight month.

Inflows into largecap funds rose 7.75% to 26.71 billion rupees in April, while midcap and smallcap inflows fell 3% and 2.2% to 33.14 billion rupees and 40 billion rupees, respectively, the AMFI data showed.

The benchmark Nifty 50 index rose 3.5% in April. The small-cap and mid-cap indexes gained 2.2% and 4.8%, respectively.

Indian benchmarks may open higher on easing trade woes, foreign inflows

“Largecaps are relatively more appealing now than they were in September 2024, when the benchmarks hit a record high,” said S Naren, executive director and chief investment officer at ICICI Prudential AMC.

The Nifty 50’s 12-month forward price-to-earnings ratio has fallen to about 21x at the end of April, from 24.4x at the end of September.

Contributions via systematic investment plans (SIPs) rose 2.7% to a record high of 266.32 billion rupees, with the number of contributing SIP accounts rising to 83.8 million from 81.1 million in March.

While global trade uncertainties remain a headwind, India’s investment cycle is likely to be on a medium-term uptrend supported by the likelihood of trade deal with the U.S., recovery in earnings and economic growth, two analysts said.

“The sustained equity inflows for 50 months indicate steady interest from mutual fund investors, but flows in the near-term could be very volatile given the India-Pakistan tensions,” AMFI CEO Venkat Chalasani said.

Given the likelihood of continued domestic rate easing in 2025, return of foreign inflows, expectations of earnings and growth recovery could accelerate inflows into mutual funds once the volatility in funds subsides, Chalasani said.