Equity mutual fund inflows fell in May, dropping 40% to a 12-month low as investors scaled back fresh lumpsum allocations amid growing concerns over the fallout of the West Asia conflict. About 22,908 crore flowed into such schemes in May, down from 38,440 crore in April, marking the steepest monthly decline since May 2023, according to data from the Association of Mutual Funds in India (AMFI).

Monthly flows through systematic investment plans (SIPs), the MF industry’s mainstay, stood at 30,954 crore, marginally lower than April’s 31,115 crore.

Sensitive to Sentiment
It marks the second straight month of lower contributions. The SIP book hit an all-time high of 32,087 crore in March.

Total assets under management eased to 81.58 lakh crore at the end of May, compared with 81.92 lakh crore in April.

Market participants attributed the slowdown in inflows to heightened geopolitical uncertainty and volatility.
“Concerns over global developments, particularly tensions in the Middle East and fluctuating crude oil prices, have led many investors to adopt a wait-and-watch approach rather than make fresh allocations,” said Ankur Punj, managing director, Equirus Wealth.Investors deferred their lumpsum investments into equity mutual funds as elevated crude oil prices, a weakening rupee and intermittent market corrections have dented near-term visibility. Unlike SIPs, lumpsum investments are more sensitive to sentiment, with investors choosing to time their entry rather than commit capital amid heightened volatility.

The Nifty declined more than 2% in May, with crude prices hovering around the $100-a-barrel mark, adding to inflation concerns.

Among equity categories, flexi-cap funds saw the highest inflows at 5,176 crore, though this was 49% lower than April levels. Small-cap and mid-cap funds attracted 4,946 crore and Rs 4,385 crore, respectively, with inflows down 33% and 28%, in that order.

In contrast, gold exchange-traded funds (ETFs) saw net outflows of 725 crore in May, the first monthly outflow in 13 months, following a steady moderation in inflows through the year after record subscriptions earlier in 2026.

Debt mutual funds witnessed a reversal, recording net outflows of 96,949 crore in May, compared with inflows of 2.47 lakh crore in April, making them the primary drag on overall industry flows.

“Over 70% of the outflows came from the shorter end of the curve, particularly from three categories — liquid, money market and overnight funds — which could be attributed to seasonality of corporate treasury management and tax cycles,” said Sanjay Agarwal, senior director, CareEdge Ratings.

Hybrid funds saw inflows moderate to 10,560 crore from 20,565 crore in April, while new fund launches remained muted. The industry saw 13 new fund offers in May, which collectively mobilised 471 crore, nearly half the amount raised in the previous month.

Shares of Inox India were among the top gainers Wednesday, after reports of massive oversubscription in the initial public offering of US-based SpaceX drew attention of Indian investors to what could be its local equipment supplier.

Inox India shares ended at 1,891.60 on the NSE Wednesday, up 12.15%. The benchmark Nifty50 closed 0.1% lower.

“The strong response to the SpaceX IPO has drawn attention to Inox India, one of the few Indian companies operating in a related segment and supplying equipment to the space ecosystem,” said Gaurav Sharma, head of research at Globe Capital Market.

SpaceX is reportedly targeting a valuation of $1.7-1.8 trillion.

Investor interest is also being supported by the company’s strong operational performance, with revenue and gross profit expanding over 120% year-on-year, reinforcing confidence in its growth prospects, Sharma said.
In its earnings call after fourth-quarter results, the chief executive Deepak Acharya said, “During Q4, we received a significant aerospace order from a leading US-based private space company with a total order value of approximately 200 crore. We are expecting more high-value orders in Q1 FY 27.”
Sunny Agrawal, head of research at SBI Securities, said there is significant activity in Inox India ahead of the SpaceX listing, and the company is also expanding into segments such as data centres, nitrogen supply and distillery kegs, which support its growth outlook.
But doubts remain about how much more can its shares gain.

“Management has guided for 15-20% growth per year, and after the recent rally, the stock is trading at a relatively rich valuation of about 56 times one-year forward earnings,” said Agrawal. “Investors may consider waiting for a correction before fresh entry, as some profit-taking and a cooling-off in the stock could follow once SpaceX gets listed.”

Shares of Inox India rose 26% in the past week and are over 67% up in 2026 so far. The Nifty50 fell 0.8% in the past week and 11.2% year-to-date.

Sharma said as the stock has already shot up in the past few days, he would suggest investors to wait for a dip towards 1,700 to take fresh entry and look for targets close to 2,000 and beyond, while maintaining stop-loss below 1,550 for a trading position.

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Bond traders-maintained bets that the Federal Reserve will raise interest rates by the end of the year, even after a soft US core inflation reading eased pressure on Chairman Kevin Warsh to act sooner.

Interest-rate swaps showed traders were still pricing in a rate hike by December after the report on Wednesday, while Treasury yields were little changed. The rate on two-year notes, which are more sensitive to near-term changes in monetary policy, was 4.11%, down from around 4.13% before the figures. The US dollar slipped.

“The biggest takeaway is that it gives the Fed a tiny bit of breathing room,” said Dan Carter, senior portfolio manager at Fort Washington Investment Advisors. “Another hot month would have put a lot more pressure on them on rate hikes, but this is just soft enough to allow them to wait and see.” The core consumer price index, which excludes food and energy to show underlying inflation, increased 0.2% from April, compared to a 0.3% consensus forecast among economists polled by Bloomberg.

Ahead of the report, traders in the options market linked to the Fed-sensitive Secured Overnight Financing Rate had been piling into positions targeting multiple rate hikes in the coming months. Some had even embraced wagers for a move as soon as September following Friday’s strong US employment report.
Those moves capped a repricing in the bond market since late February, when the US-Israel attack on Iran sparked a surge in oil prices. That upended bets that the central bank under Warsh would be able to lower rates, as Trump has advocated.

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Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

This article was written by

Analyst’s Disclosure: I/we have a beneficial long position in the shares of GOOGL, NVDA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.