Mumbai, July 9, 2025 – Equity mutual funds in India witnessed a significant resurgence in inflows during June 2025, according to the latest data released by the Association of Mutual Funds in India (AMFI). Net inflows into equity mutual funds surged by 24% to ₹23,587 crore in June, a notable increase from ₹19,013 crore in May. This rebound marks a break from a five-month declining trend in equity fund flows, signaling renewed investor confidence in the Indian equity market.
The Indian stock market has demonstrated strong performance, outpacing global peers over both short and long-term horizons. For the three-month period ending May 2025, Indian equities delivered a 16% return, significantly higher than the 5% gain in emerging markets and the 2% rise in world and developed markets. Over a five-year horizon, the Indian stock market has been the best-performing market in US dollar terms, providing 18% annualised returns. This is considerably higher than the 12% returns of world and developed markets and over four times the returns from emerging markets.
Small-cap and mid-cap stocks have been the top performers, reflecting a strong risk appetite and domestic participation in the broader market. For the three months ending in May 2025, small-cap stocks gained 21%, while mid-caps rose 17% and large caps increased 13%.
Several factors contributed to the positive sentiment in the Indian equity market. Calming geopolitical concerns and hopes of slower US rate hikes boosted Asian markets. Domestically, key sectors such as industrials, capital goods, and telecom led the rally with strong earnings and policy tailwinds. Additionally, the Reserve Bank of India's (RBI) proactive measures, including a surprise 50 basis point rate cut and a 100 basis point CRR reduction, signaled a strong pro-growth bias.
Despite the overall positive trend, the Indian equity market experienced some volatility during June. On June 30, 2025, the Sensex closed at 83,606.46, down 452.44 points or -0.54%, while the Nifty 50 lost 120.75 points or -0.47% to close at 25,517.05. Financial stocks were among the major contributors to these losses. Furthermore, heightened tensions in the Middle East led to market declines on June 23, 2025, with the Sensex dropping 500 points.
The rapid market rally has led to increased valuations, raising concerns about sustainability. Analysts have slightly increased FY25 earnings per share (EPS) forecasts for the Nifty 50 by 0.3% but revised FY26 and FY27 estimates down by 1.1% and 1.0%, respectively. While a projected 14% year-on-year growth in earnings for FY26 remains optimistic, some sectors appear overvalued.
In conclusion, the rebound in equity mutual fund inflows in June 2025 reflects renewed investor confidence in the Indian equity market. Strong domestic fundamentals, proactive policy measures, and global outperformance have contributed to this positive sentiment. However, investors should remain cautious due to rising valuations and potential market volatility.
