Monthly Market Review: May 2026

*This review was published retrospectively in November 2026 and is dated to the start of the following month. Some figures, such as AMFI flows and RBI policy, were released in early June and are included for completeness.*

Month at a glance

Equity and sectors

May was a split month. The large-cap benchmarks fell: the Sensex dropped 2.6% and the Nifty 1.7%. The broader market rose, with mid-caps and small-caps each up about 2.5%.

Three forces weighed on the headline indices:

1. West Asia conflict: renewed US strikes in Iran revived fears for shipping through the Strait of Hormuz. Brent crude rose above $100 at several points before easing to about $92 by month end.
2. Foreign selling and a weaker rupee: the rupee hit fresh record lows, falling past ₹95 and then to around ₹96.3 per dollar by mid-May, as oil prices raised the import bill.
3. Month-end pressures: on 29 May, India's weather office forecast a below-normal monsoon (90% of the long-period average). MSCI's index rebalancing, which cut India's weight in its Emerging Markets index, added to selling in the final session. The Sensex lost 1,092 points that day.

Sectors: Healthcare and Capital Goods led the gains, followed by Metals and Power. Autos also rose. Realty, IT and Banks slipped slightly, and FMCG and Oil & Gas were the weakest.

Debt and rates

At its 5 June meeting, RBI's Monetary Policy Committee kept the repo rate at 5.25% with a neutral stance. The vote was unanimous. The standing deposit facility rate stayed at 5.00%, and the marginal standing facility rate and Bank Rate at 5.50%.

RBI said domestic activity had been "largely steady" since the conflict began, but warned that risks to both growth and inflation had increased. April CPI inflation of around 3.5% gave it room to wait. Even so, a weaker rupee, high energy prices and a below-normal monsoon forecast all point to inflation risks ahead.

Mutual fund flows (AMFI, May 2026)

• SIP contributions stayed above ₹30,000 crore for a third month, and were about 16% higher than a year earlier. SIP assets reached about ₹17.1 lakh crore.
• Net equity inflows fell about 40% from April to the lowest level of 2026 so far. They were still positive, as they have been every month for more than four years.
• Flexi-cap (₹5,176 crore), small-cap (₹4,946 crore) and mid-cap (₹4,385 crore) funds received the most money.
• Gold ETFs saw net outflows of about ₹725 crore.
• The industry as a whole saw a net outflow of about ₹0.64 lakh crore, which is typical of month-end movements in debt and liquid funds.

Gold, silver and global

• Gold ended May almost exactly where it started in rupee terms, after a narrow range for the month. It was up about 13% for the year so far.
• Silver rose about 4% for the month, despite a sharp two-day fall in mid-May.
• Crude oil was the main global swing factor. Brent was about 27% above its level before the conflict at month end.
• Globally, US Treasury yields rose as markets pared back hopes of Federal Reserve rate cuts, and the US dollar strengthened.

What investors may note

• Large-cap and mid/small-cap returns can diverge sharply within a single month. Diversifying across market caps, in line with your risk profile, helps smooth out these swings.
• SIP investors kept investing through the volatility. Regular investing averages out entry prices over time.
• Oil prices and the rupee move together and matter a lot for India's markets, inflation and interest rates.
• Before acting on short-term news, review your asset allocation against your goals.

The month ahead (June 2026)

• RBI policy decision: 5 June (repo rate held at 5.25%)
• AMFI monthly data for May: around 10 June
• CPI inflation for May: mid-June
• Monsoon onset and progress
• West Asia developments and crude oil prices

*Sources: HSBC Mutual Fund Equity Market Review (May 2026), NSE/BSE closing data, RBI Monetary Policy Statement (5 June 2026), AMFI monthly data (May 2026) as reported, and published market reports. Figures are rounded.*