Equity mutual fund inflows experienced a significant decline, falling 40% month-on-month to ₹22,907 crore in May 2025, according to the Association of Mutual Funds in India (AMFI) data released on Wednesday, June 10. This represents a substantial drop from the ₹38,440 crore recorded in April, marking one of the lowest levels in recent months. The overall mutual fund industry reported a net outflow of ₹64,131 crore in May, a stark contrast to the net inflow of ₹3.22 lakh crore recorded in April.
The primary driver of the overall outflow was debt-oriented schemes witnessing net outflows of ₹96,948 crore, as reported by Prabhudas Lilladher AMC. According to Umesh Sharma, CIO-Debt at The Wealth Company Mutual Fund, debt funds experienced significant redemptions of approximately ₹97,000 crore in May, led by outflows from shorter-term funds including liquid, overnight, and money market funds. The withdrawals were attributed to tighter liquidity conditions that pushed short-term yields higher.
Gold Exchange Traded Funds (ETFs) experienced a significant reversal, recording net outflows of ₹725 crore in May - marking their first monthly outflow in 13 months, as reported by AMFI data. As noted by Prabhudas Lilladher AMC, this represented a swing from alternative allocations facing pressure, with investors appearing to be fatigued with markets that have been sideways for the past two years.
Among the eleven categories, flexi cap funds remained investors' favourite with inflows of ₹5,175 crore in May, though this was lower than the record-high inflow of ₹10,147 crore in April. Small cap funds received inflows of ₹4,945 crore, followed by mid cap funds at ₹4,385 crore. On a month-on-month basis, inflows into small cap and mid cap funds declined by 28% and 33% respectively, according to AMFI data.
Industry experts attribute the decline to stock market volatility and geopolitical uncertainty affecting investor sentiment. Juzer Gabajiwala from Ventura noted that neither equity nor hybrid funds have been spared, with investors fatigued by sideways markets over the past two years. SIPs have also declined continuously for the past two months, with potential for further stoppages as even FIIs are selling off from India. The next two months will be critical as markets face the impact of monsoon season and first quarter results for FY 2025-26.
