Net inflows into equity mutual funds fell sharply in May 2026 as volatile market conditions and geopolitical concerns weighed on investor sentiment, according to the latest Axis Mutual Fund analysis of AMFI data.
Equity inflows hit 12-month low
The report said that "with markets continuing to be volatile amidst elevated geopolitical tensions, uncertainty around negotiations, concerns around potential supply disruptions and volatility in crude prices, net inflows into Equity Mutual Funds fell 40% in May '26 (from Rs 38,426 Cr. to Rs 22,898 Cr.), marking the lowest level in the past 12 months and the second-lowest since the market correction began in September 2024."
Equity mutual funds recorded net inflows of Rs 22,898 crore in May, down from Rs 38,426 crore in April. The report noted that "net inflows into the Equity Mutual Funds in May 2026 dropped 40% over the previous month."
Flexi cap funds see near-50% decline
Investor caution was also visible across categories. According to the report, "net sales in the largest equity category, Flexi Cap, have almost halved in May 2026." Data showed that Flexi Cap Funds witnessed a 48.99 per cent decline in net sales compared to the previous month.
SIP contributions remain resilient above Rs 30,000 crore
Despite the moderation in lump-sum inflows, systematic investments continued to provide support to the industry. The report said, "while SIP contribution remains resilient and continues to be over Rs 30,000 Cr. in May 2026, it has marginally declined 0.5% over the previous month and is down 3.5% from its peak in March 2026." SIP contributions stood at Rs 30,954 crore in May, remaining above the Rs 30,000-crore mark for the third consecutive month. The report highlighted that "the SIP contribution stays above Rs 30,000 Cr. for the 3rd consecutive month."
Hybrid funds also slow down
Hybrid funds also witnessed weaker investor participation during the month. The report stated that "Hybrid Funds too witnessed a slowdown, with net sales dropping 48%." However, it added that "very conservative hybrid categories like Conservative Hybrid and Equity Savings, saw a marginal pick up in net sales (turning positive compared to the previous few months)."
Debt schemes face redemptions
Debt-oriented schemes faced redemption pressure. According to the report, "net inflows across Debt and Cash segments were negative in May 2026 as institutional clients redeemed across the curve, pricing in rate hikes." Debt mutual funds registered net outflows of Rs 52,906 crore during the month.
ETF segment turns negative
The exchange-traded fund segment also saw weakness. The report observed that the "ETF category (both Gold and other ETFs) saw negative net sales, marking the first such instance in the last one year."
Industry AUM slips
Overall industry assets under management were impacted by outflows from debt and cash categories. The report said "Mutual Fund AUM slips due to large outflows in Debt & Cash segments in May 2026," with total mutual fund assets under management standing at Rs 81.58 lakh crore during the month.
Outlook: selective opportunities in equities and debt
Looking ahead, Axis Mutual Fund sees improving opportunities in select pockets of the market. On equities, the report said, "following the recent market correction, equity market valuations have become more balanced, albeit selectively. Large Cap stocks and certain cyclical sectors appear more reasonably priced after the drawdown, offering improved entry points from a risk-reward perspective." On fixed income, the report added that "with markets pricing in future rate hikes, elevated yields combined with supportive liquidity conditions enhance the potential for better risk-adjusted debt returns."
