India’s mutual fund industry witnessed a moderation in equity flows in May, largely weighed down by higher redemptions despite systematic investment plan inflows holding firm at all-time highs. Equity mutual fund flows, excluding arbitrage and NFOs, dropped 21% month-on-month to Rs 22,700 crore, marking the first net outflow in lumpsum equity investments since July 2023, Jefferies pointed out.

Despite the moderation, brokerages are maintaining a constructive outlook. Nomura maintained its preference for HDFC AMC and Nippon Life India AMC, citing strong AUM and operating profit growth visibility.

Nomura also reported a decline in net equity inflows to Rs 24,200 crore in May, down from Rs 26,900 crore in April. In contrast, SIP inflows remained resilient, coming in flat month-on-month at Rs 26,700 crore—a 28% jump from the previous year. SIP accounts climbed to 8.56 crore, up 2% monthly and 30% annually. SIP assets under management rose to Rs 14.6 lakh crore, reflecting 27% year-on-year growth.

Bernstein noted that while both SIP and lumpsum inflows held up in May, redemptions surged, resulting in a net monthly MF inflow drop of 11% from April and nearly 48% off the December quarter highs. SIPs were the key driver of gross inflows and are expected to continue leading net inflows in the fiscal. Bernstein maintained its forecast of $40-45 billion in net flows from households into mutual funds during the financial year, translating to 8-9% of active equity and hybrid AUM.

Equity fund flows faltered across most categories. Large-cap fund inflows plunged 53% month-on-month, while small-cap, mid-cap, and flexi-cap funds saw drops of 20%, 15%, and 15% respectively. Sectoral/thematic funds held steady at Rs 2,100 crore, while large-and-midcap funds inched up marginally.

On the debt side, inflows into debt mutual funds slowed to Rs 20,700 crore from Rs 43,800 crore in April. Liquid funds witnessed a sharp reversal, recording outflows of Rs 37,100 crore against record inflows of Rs 1.74 lakh crore in the previous month.

. Read more on Mutual Funds by NDTV Profit.SIPs were the key driver of gross inflows and are expected to continue leading net inflows in the fiscal.  Read MoreMutual Funds, Personal Finance, Markets, Notifications 

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