recorded net outflows of ₹725 crore in May, marking the category’s first monthly outflow in 13 months, according to data released by the Association of Mutual Funds in India (AMFI) on Wednesday.
The outflow ended a streak of positive net inflows that had continued uninterrupted since April 2025.
The reversal comes after a steady slowdown in investor demand through 2026. Gold ETFs had attracted a record ₹24,039 crore in net inflows in January, but monthly inflows moderated to ₹5,254 crore in February, ₹2,265 crore in March and ₹3,040 crore in April before turning negative in May.
Why did Gold ETF inflows fall?
The May outflow capped a steady slowdown in investor demand this year. After attracting a record ₹24,039 crore in net inflows in January, Gold ETFs saw inflows ease to ₹5,254 crore in February, ₹2,265 crore in March and ₹3,040 crore in April before slipping into a net outflow in May.
The reversal was driven largely by weaker fresh investments. Gross inflows nearly halved to ₹2,604 crore in May from ₹5,093 crore in April, while redemptions rose to ₹3,329 crore from ₹2,053 crore.
According to Nehal Meshram, senior analyst at Morningstar Investment Research India, the trend suggests that the strong momentum seen at the start of the year gradually faded as investors became more cautious about adding fresh exposure to gold.
“Gold ETFs saw a moderation in net inflows through early 2026, followed by a reversal in May. After strong inflows of ₹24,039 crore in January, momentum tapered in subsequent months, indicating a gradual cooling in incremental allocations,” she said.
Meshram attributed the reversal to a mix of profit booking after the rally in gold prices and a shift in investor preferences towards riskier assets.
“The reversal appears to have been driven by a combination of profit booking following the earlier rally in gold prices and a shift in investor risk appetite, with some rotation away from safe-haven assets,” she said.
She added that relatively attractive yields may also have reduced the appeal of gold for some investors.
“Additionally, the rising opportunity cost of holding gold, particularly in an environment of relatively attractive yields in fixed income, may have contributed to the pullback.”
While May’s gross inflows were significantly lower than April’s, they remained broadly within the ₹2,000-3,000 crore range seen through much of 2025, suggesting that investor interest in the asset class has cooled rather than disappeared.
Gold ETF AUM rose despite net outflows
Despite the net outflow, assets under management (AUM) of Gold ETFs rose to ₹1.85 lakh crore at the end of May from ₹1.78 lakh crore a month earlier.
The ₹6,460 crore increase came despite investors withdrawing money from the category, indicating that gains in gold prices more than offset the outflows. In effect, the entire rise in AUM was driven by mark-to-market appreciation rather than fresh investments.
The divergence highlights how strongly gold prices have performed this year, helping boost the value of existing holdings even as investor flows weakened.
Folios fell by over 1.34 lakh
Investor participation also weakened during the month.
The number of Gold ETF folios fell to 1.23 crore in May from 1.25 crore in April, a decline of 1,34,343 folios. The drop suggests that some investors exited the category altogether rather than merely reducing allocations.
Meshram said the trend points to the tactical nature of a large part of the earlier inflows.
“The pattern of flows suggests that a significant portion of earlier allocations was tactical in nature, making them more sensitive to price movements and short-term macro cues,” she said.
“The trend points to waning incremental demand after a strong start to the year, with flows becoming more tactical and price-sensitive, rather than indicative of sustained structural allocation shifts.”
Equity fund inflows also hit 2026 low
The moderation in investor appetite was visible beyond Gold ETFs.
Net inflows into actively managed equity mutual funds fell 40.4% to ₹22,907 crore in May from ₹38,440 crore in April, marking the lowest monthly inflow recorded so far in 2026.
The decline was broad-based across categories. saw inflows fall 49% to ₹5,175 crore from ₹10,147 crore in April, while sectoral and thematic funds recorded inflows of ₹647 crore, down from ₹1,949 crore.
Large-cap funds attracted ₹1,592 crore, down 36.9% from the previous month. Mid-cap fund inflows fell 33.1% to ₹4,385 crore, while small-cap funds received ₹4,945 crore, down 28.2%.