- Mutual fund industry faced sharp net outflows in May 2026.
- Debt schemes experienced major outflows, driven by institutional liquidity.
- Equity funds maintained positive inflows, despite significant moderation.
The Mutual Fund industry witnessed a sharp reversal in fund flows during May 2026, with net outflows of Rs 64,021.17 crore compared with net inflows of Rs 3,22,402.98 crore in April, according to data released by the Association of Mutual Funds in India (AMFI). The decline was primarily driven by large withdrawals from debt-oriented schemes, while Equity Fund inflows remained positive despite moderating significantly.
Debt schemes see sharp liquidity-driven reversal Debt-oriented schemes emerged as the biggest drag on industry flows. The category recorded net outflows of Rs 96,948.51 crore in May against inflows of Rs 2,47,490.03 crore in April, reflecting a decline of 139.2 per cent month-on-month.
The reversal was largely concentrated in liquid funds, overnight funds and money market funds, indicating short-term liquidity withdrawals by institutional investors rather than broad-based retail redemptions. Liquid funds saw flows swing from inflows of Rs 1,65,104.67 crore in April to outflows of Rs 29,680.94 crore in May.
Overnight funds, money market funds, low-duration funds and corporate bond funds also recorded sharp declines. Medium-duration and dynamic bond funds showed relatively better trends as their outflows narrowed compared with the previous month. Equity inflows remain positive despite moderation Despite the weakness in Debt Funds, equity-oriented schemes continued to attract investor money. Equity funds received net inflows of Rs 22,907.77 crore in May, although this was 40.4 per cent lower than the Rs 38,440.20 crore recorded in April.
Flexi-cap funds remained the most preferred equity category, attracting Rs 5,175.54 crore during the month. Small-Cap funds received Rs 4,945.57 crore, while Mid-Cap funds garnered Rs 4,385.06 crore. Large and mid-cap funds, Large-Cap funds and multi-cap funds also continued to witness positive inflows, though at a slower pace compared with April.
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Sectoral and thematic funds experienced one of the sharpest slowdowns, with inflows declining 66.8 per cent month-on-month. Dividend yield funds and ELSS schemes remained in the red, with outflows increasing during the month.
Hybrid Funds continue attracting investors Hybrid schemes maintained positive momentum but saw inflows nearly halve. The category attracted Rs 10,560.24 crore in May compared with Rs 20,565.24 crore in April, marking a decline of 48.7 per cent. Arbitrage funds remained the largest contributor within the segment with inflows of Rs 5,697.90 crore. Multi-asset allocation funds also continued to attract healthy investor interest.
However, balanced advantage funds and aggressive hybrid funds reported a significant moderation in inflows during the month. Solution-oriented funds remain stable Solution-oriented schemes remained relatively stable compared with other categories. The segment recorded inflows of Rs 270.36 crore, down 11.9 per cent from April.
Both retirement funds and children’s funds continued to receive positive inflows, indicating steady participation in long-term, goal-based investment products despite volatility in broader mutual fund flows. Passive funds and ETFs lose momentum Passive and exchange-traded fund (ETF) categories witnessed a sharp loss of momentum. Other schemes reported inflows of just Rs 361.99 crore compared with Rs 20,082 crore in April, representing a decline of 98.2 per cent.
Gold ETFs moved into outflow territory after strong inflows in the previous month, while other ETFs also registered net outflows. Index Funds remained positive but saw substantially lower inflows, highlighting softer investor participation in passive investment products. Domestic fund of funds also witnessed moderation, attracting Rs 957.45 crore in May, down 68.6 per cent from April.
Key takeaway
AMFI’s May 2026 data suggests that the industry’s headline outflow was largely driven by a liquidity-led reversal in debt schemes rather than a widespread withdrawal from mutual funds. Equity inflows remained positive across major categories, with flexi-cap, small-cap and mid-cap funds continuing to attract investors despite slower inflow growth. While hybrid and solution-oriented schemes remained resilient, passive funds and ETFs lost momentum after a strong April. The next set of AMFI data will be closely tracked to assess whether debt fund liquidity returns and whether equity inflows regain strength in the coming months.
(Disclaimer: This article uses information originally published by Dalal Street Investment Journal (DSIJ). The views expressed are those of the original authors and not necessarily of ABP Network Pvt. Ltd. This content is provided for general informational and educational purposes only and should not be construed as investment, financial, legal or tax advice. Readers are advised to conduct their own research and/or consult a qualified financial advisor before making any investment decisions. This content is for informational purposes only and should not be treated as investment advice. ABP Network, its employees and associates shall not be responsible or liable for any losses or damages arising directly or indirectly from the use of or reliance on this article or any information contained herein.)
