The latest market decline has intensified foreign investor selling pressure, with Foreign Institutional Investors (FIIs) offloading equities worth over ₹12,000 crore within just a few trading sessions. Sensex crashed nearly 1,200 points after Iran and the US failed to reach a consensus over ending the war, with the 30-share BSE benchmark closing at 76,015.28, down 1,312.91 points or 1.70%. The NSE Nifty plunged over 1% to 23,845, while the BSE 150 Midcap and 250 Smallcap indices also declined by up to 1% during the session. Market capitalisation of BSE-listed firms dropped to nearly ₹468 lakh crore from ₹473.5 lakh crore in the previous session, making investors poorer by more than ₹5 lakh crore. The immediate trigger came after Prime Minister Narendra Modi's speech on May 10, which the market interpreted as a sign of mounting macroeconomic stress, compounded by US President Donald Trump dismissing Iran's response to the latest peace proposal as 'totally unacceptable'. As per The Times of India, the market crash was triggered by Iran and the US failing to reach a consensus over ending the war, which intensified foreign investor selling pressure.
Low-volatility funds are drawing attention for their ability to cushion investors against sharp market swings, with these passive funds tracking low-volatility indices that invest in stocks selected on volatility scores rather than business fundamentals. Over the past six months, funds tracking the Nifty100 Low Volatility 30 Index have declined a little over 4.5%, compared with a more than 7% fall in the Nifty 50 as of May 11. In March alone, these funds fell around 10%, versus the Nifty 50's decline of over 11%. Over a one-year period, funds linked to the low-volatility index are up more than 3.5%, while the Nifty 50 has slipped 4.4%. The pattern has held across previous market turbulence, with during the global financial crisis of 2008, the Nifty 50 plunged 56.2% between January 8 and November 27, while the Nifty100 Low Volatility 30 Index fell 46.2%. In the COVID-led crash of 2020, the Nifty 50 lost 37.23% in a single month, compared with a 29.4% decline for the low-volatility index. As of April, the index had a one-year standard deviation of 12.18, compared with 13.59 for the Nifty 50, reflecting its tilt toward steadier businesses. The portfolio is skewed towards defensive sectors, with financial services accounting for 21.17%, healthcare at 16.36%, and FMCG at 14.96%.
Flexi-cap funds emerged as the top investment category in April 2026, recording inflows of approximately ₹101 billion, representing a sharp increase from ₹55 billion in April 2025, according to ET Now. These schemes, which have the flexibility to shift allocations across large-, mid- and small-cap stocks, appear to be benefiting from investor preference for diversified exposure amid market uncertainties. The category has now topped inflow charts for nine consecutive months, with both March and April seeing inflows exceeding the ₹100 billion mark. Domestic equity mutual funds continued to attract steady investor interest in April, with overall inflows largely unchanged on a month-on-month basis, with equity inflows (excluding exchange-traded funds) standing at ₹427 billion during the month, marginally lower than ₹428 billion recorded in March, as reported by Morgan Stanley. Despite the market volatility, domestic equity inflows for the first four months of 2026 reached ₹2.15 trillion, significantly higher than ₹1.74 trillion during the same period last year.
Monthly contributions through SIPs (Systematic Investment Plans) declined marginally to ₹31,115 crore in April from ₹32,087 crore in March, as reported by The Hindu BusinessLine. However, SIP assets rose to ₹16.85 lakh crore from ₹15.11 lakh crore despite sharp swings in the market and continued foreign portfolio investor outflows. The number of contributing SIP accounts also dipped slightly to 9.65 crore in April from 9.72 crore in March, while the number of discontinued SIP accounts stood at 51.21 lakh, marginally higher than the 50.71 lakh new SIP accounts opened during April. Venkat Chalasani, CEO of AMFI, explained that the higher number of SIP stoppages compared with new SIP accounts opened could be due to SEBI norms mandating that a SIP account be classified as discontinued if instalments are stopped continuously for three months. He noted that the March inflow figure was an aberration as it included the last four days of February, which were market holidays. As per The Hindu BusinessLine, experts suggest it's too early to identify a trend, though market volatility may have impacted investor sentiment. Suranjana Borthakur, Head of Distribution & Strategic Alliances at Mirae Asset Investment Managers (India), said the slight moderation in SIP inflows should not be seen as a slowdown, especially after the previous month's elevated numbers due to spillover inflows, maintaining SIP inflows at around the ₹31,000-crore mark reflects steady participation of retail investors.
ETF inflows fell sharply to ₹154 billion from ₹280 billion in the previous month, reflecting some ebbing of passive flows, according to Morgan Stanley report. This decline comes as investors shift away from passive investment strategies amid geopolitical tensions. Non-SIP inflows edged higher to ₹116 billion, suggesting that lump-sum investments picked up even as systematic contributions cooled slightly. The broader trend remains positive, with funds mobilised through equity-oriented offerings amounting to USD 1 billion so far in 2026 versus USD 4.5 billion in C2025 and USD 12 billion in C2024, as noted by Morgan Stanley. On the debt side, short-duration funds saw robust inflows during April, while flows into medium- and long-duration categories were relatively modest, with the data suggesting that while there are pockets of moderation, particularly in SIPs and ETFs, domestic investor appetite for equities remains intact.
Despite market volatility, industry experts emphasize that continued investor participation in mutual funds reflects the growing maturity and resilience of retail investors. A Balasubramanian, Managing Director & CEO of Aditya Birla Sun Life AMC, noted that this shift indicates a balanced approach to wealth creation, with investors focusing on asset allocation, stability and long-term goal-based investing amid global uncertainty. Navneet Munot, MD & CEO of HDFC Asset Management Company, said equity flows have held up well, reflecting the growing maturity of the investor base and deepening awareness about the merits of systematic investing. As per The Hindu BusinessLine, Suranjana Borthakur, Head of Distribution & Strategic Alliances at Mirae Asset Investment Managers (India), said the slight moderation in SIP inflows should not be seen as a slowdown, especially after the previous month's elevated numbers due to spillover inflows. The data suggests that long-term financial goals are increasingly guiding investment decisions over short-term noise. AMFI feels it is too early to conclude that the dip in SIP inflows marks a trend, though market volatility may have impacted investor sentiment, with investors continuing to invest in equities, debt and gold through the mutual fund route despite volatile markets due to geopolitical tensions.
