The Indian mutual fund industry’s AUM reached ₹81.6 lakh crore in May 2026, with flexi cap funds attracting ₹95,154 crore in inflows over the past year. While foreign investors have been selling, strong domestic SIP contributions are providing a critical buffer for the equity market.
What The Industry Numbers Reveal
The Indian mutual fund industry has seen significant growth in assets under management (AUM), touching ₹81.6 lakh crore as of May 2026. Within this, equity mutual fund AUM has grown by 12.7% over the last year to reach ₹36.18 lakh crore. This expansion reflects broader participation from across the country, with assets from B30 locations—areas beyond the top 30 cities—now accounting for 18% of the total industry AUM. The growth in B30 regions suggests that mutual fund investing is becoming a preferred financial tool for a wider base of Indian households.
Why Investors Are Choosing Flexi Cap Funds
Flexi cap funds have emerged as the most popular choice for equity investors, recording net inflows of ₹95,154 crore in the 12 months leading to May 2026. The structure of these funds is likely driving this preference. Unlike funds restricted to a specific market cap, such as only large or only small companies, flexi cap funds allow fund managers to move capital between large, mid, and small-sized companies based on market conditions.
For many investors, this flexibility provides a sense of security, especially during phases of market volatility where one sector or market segment may underperform while another remains resilient. This demand is consistent, even as other categories like mid cap and small cap funds continue to draw steady interest, with annual inflows of ₹56,011 crore and ₹56,490 crore, respectively.
The DII and FPI Tug-of-War
A notable trend over the last 12 months is the diverging behavior of domestic and foreign investors. Domestic Institutional Investors (DIIs), which include mutual funds, have been aggressive net buyers, investing ₹8.9 lakh crore into Indian equities. This domestic buying has acted as a stabilizer for the market.
In contrast, Foreign Portfolio Investors (FPIs) recorded net outflows of ₹4.7 lakh crore during the same period. When foreign money leaves the market, the sustained buying by domestic investors—largely driven by the consistent monthly inflows from retail participants—is what helps maintain price stability. Investors often monitor this tug-of-war, as the health of the broader market currently relies heavily on domestic inflows to absorb selling pressure from international investors.
The Resilience of SIPs
The backbone of this domestic liquidity remains the Systematic Investment Plan (SIP). In May 2026, monthly SIP contributions hit ₹30,954 crore, with the number of active SIP accounts climbing to 10.47 crore. Furthermore, the value of SIP assets has grown by 17% year-on-year to ₹17.12 lakh crore. The fact that SIP assets as a percentage of total equity AUM have reached a multi-year high of 29% suggests that retail investors are increasingly disciplined and less likely to panic during market swings.
What Investors Should Track Next
While the data shows strong inflows, investors should pay attention to a few key areas. First, the sustainability of domestic inflows is vital; if domestic sentiment shifts or if inflation affects disposable income, the pace of SIP contributions could be tested. Second, the rising popularity of passive funds, which saw AUM rise 23% year-on-year to ₹14.77 lakh crore, indicates that investors are increasingly looking for low-cost investment options. Finally, market valuations remain a point of discussion, and investors may watch how mutual funds manage cash levels within their portfolios to navigate potential market corrections.