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June 17, 2026
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Equity Mutual Fund Inflows Drop 22% in May to 13-Month Low Amid Profit-Taking and Valuation Concerns

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Contributor · Jun 11, 2025, 4:48 AM · ⏱ 2 min read
Equity Mutual Fund Inflows Drop 22% in May to 13-Month Low Amid Profit-Taking and Valuation Concerns

Equity mutual fund (MF) inflows in India witnessed a sharp decline in May 2025, as profit-taking and high valuations led many investors to adopt a cautious stance. Net equity MF inflows stood at ₹19,013 crore — a 21.7% drop from April’s ₹24,269 crore — marking the lowest monthly inflow in 13 months. This also represents the fifth consecutive month of declining flows into equity schemes.

Category-Wise Breakdown: Large-Caps Hit the Hardest

The slowdown was broad-based across most equity fund categories:

- Large-cap funds: Inflows plunged 53% to ₹1,250 crore.

- Mid-cap funds: Fell ~15% to ₹2,809 crore.

- Small-cap funds: Down ~20% to ₹3,214 crore.

- Flexi-cap funds: Stayed resilient at ₹3,841 crore.

- Other categories: Outflows in ELSS, value/contra, and dividend-yield funds.

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The sharp fall in large-cap flows suggests that investors are becoming wary of overheated valuations.

Equity Markets Remain Resilient Despite Lower Inflows

Despite lower fund flows, equity markets stayed strong:

- Sensex: Up ~1.5% in May.

- Nifty: Gained ~1.7%.

Total mutual fund AUM (Assets Under Management) reached a record ₹72.2 lakh crore, up from ₹69.99 lakh crore in April. Equity investments have now maintained positive inflows for 51 straight months, showing steady investor confidence.

Why Are Inflows Slowing?

Key drivers behind the pullback include:

  1. Profit-taking:
    Investors booked gains after recent rallies.
  2. High Valuations:
    Elevated P/E ratios made fresh investments riskier.
  3. Global & Geopolitical Uncertainties:
    • - Global inflation
    • - Interest rate worries
    • - India-Pakistan tensions
      All added to risk-off sentiment.

Shift in Investor Preferences: SIPs, Hybrids & Arbitrage Gain Popularity

While lump-sum investments slowed, SIPs remained strong:

- SIPs: Hit a new high of ₹26,688 crore in May.

- Hybrid & Arbitrage Funds:
Hybrid fund inflows jumped ~46% to ₹20,765 crore; arbitrage funds alone drew ₹15,702 crore.

- Debt Funds:
Witnessed outflows of ₹15,908 crore, especially from liquid and overnight categories.

What Experts Are Saying

- Venkat N Chalasani (AMFI Chief):
"Investors showed caution and shifted to hybrids/arbitrage."

- Himanshu Srivastava (Morningstar):
Highlighted profit-booking and global uncertainties as key factors.

- Business Today Data:
Net-to-gross inflow ratio fell to ~33.6%, indicating strong redemption pressure.

Bottom Line

This is a short-term dip, not a long-term reversal. AUM and SIPs show strong underlying confidence. Investors are becoming more selective, favoring hybrid, arbitrage, and SIPs. Future inflows could rebound if valuations ease and macro risks stabilize.

Arbitrage FundsAUMDebt Funds

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