Passive equity inflows hit three-month low in May amid market volatility

Net inflows into index funds and ETFs fell sharply in May, mirroring weakness in active equity schemes amid volatile market conditions

Passive equity fund flows moderated sharply in May, mirroring the weakness seen in active equity schemes amid volatile market conditions. Net inflows into index funds fell 73 per cent month-on-month to ₹2,782 crore from ₹10,218 crore in April, while exchange-traded funds (ETFs) attracted ₹6,692 crore, down 31 per cent from ₹9,668 crore in the previous month. The combined net inflows at ₹9,474 crore was the lowest in three months. 

The decline in inflows came amid heightened market volatility and global uncertainties last month. Benchmark indices Nifty 50 and Sensex ended May in the red after a strong recovery in April. Net inflows into active equity schemes plunged 40 per cent month-on-month to a one-year low of ₹22,908 crore in May as gross inflows weakened and redemptions increased. 

Despite the moderation, passive funds have continued to attract sizeable investor interest over the past year. Between June 2025 and May 2026, index funds and ETFs together garnered net inflows of over ₹1.26 trillion. The flows were aided by a strong March, when passive equity funds collected ₹30,235 crore, led by ETF inflows of ₹23,820 crore.