Indian equity mutual fund inflows fell to a 13-month low in May, marking the fifth consecutive month of decline, with large-, mid-, and small-cap funds all reporting reduced inflows.
Net inflows dropped about 22% month-on-month to 190.13 billion rupees ($2.22 billion), the lowest since April 2024, data from the Association of Mutual Funds in India (AMFI) showed on Tuesday.
The decline was driven by a softer market in May after sharp rallies in earlier months, stretched valuations, macro headwinds including India-Pakistan tensions, and global inflation concerns, said Himanshu Srivastava – associate director - manager research, Morningstar Investment Research India.
Despite this, India’s Nifty 50 rose 1.7% in May, logging a third straight month of gains, supported by the return of foreign buying and improved March-quarter earnings.
Foreign portfolio investors (FPI) bought Indian shares worth $2.34 billion in May, the highest monthly inflows since September 2024 when the benchmarks hit record highs.
The broader small- and mid-caps jumped 8.7% and 6.1%, respectively, buoyed by foreign buying and a surge in some defense stocks. Inflows into large-cap funds more than halved to 12.5 billion rupees in May, while mid- and small-cap funds saw inflows decline 15% and 20% to 28.09 billion rupees and 32.14 billionrupees, respectively, AMFI data showed.
India’s mutual funds held an unprecedented 2.15 trillion rupees in cash as of April. Analysts said the record high cash holding indicates that funds may be awaiting more favourable valuations.
While overall inflows moderated in May, contributions via systematic investment plans (SIPs) - a mode of investment for mutual fund investors - rose marginally to a record high of 266.88 billion rupees in May. The number of SIP accounts also rose to 85.6 million from 83.8 million in April.
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