Market Review May 2025

World Happenings:
May 2025 was marked by significant geopolitical and environmental developments. Geopolitical tensions escalated in South Asia as India and Pakistan engaged in large-scale military actions following the April 22 Pahalgam attack. The conflict peaked with Indian missile strikes on May 7 and ended after four days with a ceasefire brokered by the United States on May 10. On the economic front, the US Federal Reserve kept interest rates steady but hinted at possible rate cuts later this year, supporting investor sentiment. India posted a strong GDP growth of 7.4% in Q4 FY25, primarily driven by manufacturing and services.

Market Roundup:
Indian stock markets ended May on a positive note. The Sensex began the month at 80,501.99 and closed at 81,451.02 on May 30, gaining nearly 949 points or 1.18% for the month.

Gold prices in India remained elevated throughout May as demand for safe-haven assets persisted. On May 28, 24-carat gold was priced around ₹95,860 per 10 grams in cities like Hyderabad and Mumbai. Prices hovered between ₹95,500–₹96,000 for 24-carat and ₹87,800–₹87,900 for 22-carat gold, with a minor uptick of 0.2% observed during the final week of the month.

May saw a noticeable moderation in equity mutual fund inflows, which fell to their lowest level in a year. According to AMFI data, net investments in equity mutual funds dropped by 21.66% to ₹19,013 crore, reflecting a more cautious investor approach amid market volatility and profit booking. Large Cap funds saw net inflows fall sharply by over 53% to ₹1,250 crore, while midcap and smallcap funds also registered declines in inflows, down to ₹2,809 crore and ₹3,214 crore respectively.

Despite this slowdown, May marked the 51st consecutive month of positive equity inflows, highlighting the underlying confidence in the Indian equity market. Hybrid schemes, particularly arbitrage and multi-asset allocation funds, witnessed robust inflows as investors sought a balanced approach during uncertain times. Sectoral and thematic funds remained in focus, with two new launches raising ₹1,792 crore and the overall category attracting ₹2,052 crore in net inflows. Debt mutual funds, on the other hand, experienced net redemptions of ₹15,908 crore, primarily driven by outflows from liquid and overnight funds. The month also saw the launch of 19 new schemes across categories, collectively raising ₹4,170 crore.

Systematic Investment Plans (SIPs) continued to be the bedrock of retail investment activity. Monthly SIP contributions reached a record high of ₹26,688 crore in May, up from ₹26,632 crore in April. The number of contributing SIP accounts increased to 8.56 crore, while total SIP accounts reached 9.06 crore. SIP assets under management rose to ₹14.61 lakh crore, now accounting for over 20% of the total mutual fund industry AUM. Despite the dip in equity flows, the mutual fund industry’s total AUM crossed the ₹72 lakh crore milestone for the first time, reaching ₹72.20 lakh crore, up from ₹69.99 lakh crore in April. Overall net inflows across all mutual fund categories stood at ₹29,108 crore in May, reflecting continued investor trust and the maturing nature of Indian retail investors.

Conclusion:
May 2025 underscored the resilience of Indian markets in the face of geopolitical and economic uncertainty. The Sensex and Nifty posted healthy gains, led by strong performances in IT, pharma, and midcap stocks. Gold remained a stable asset, and mutual funds saw a return of investor confidence. While volatility and global risks remain, the month’s performance highlights the benefits of staying invested and maintaining a diversified approach.

Sources:
AMFI, CNBC18, Moneycontrol

Sapna Mehta

Collaborations & Partnerships team | FIKAA