The outflows have pulled the asset base of debt mutual funds to ₹12.41 lakh crore at the end of September, from ₹13.03 lakh crore at the end of August.
The outflows have pulled the asset base of debt mutual funds to ₹12.41 lakh crore at the end of September, from ₹13.03 lakh crore at the end of August.
Debt funds focused on investments in fixed-income securities saw an outflow of ₹65,372 crore in September amid an increase in the interest rate cycle and redemption by corporates to pay advance tax.
This comes after net inflows of ₹49,164 crore in August and ₹4,930 crore in July, showed data available with the Association of Mutual Funds in India (Amfi).
Earlier, investors pulled out over Rs 70,000 crore from debt mutual funds in April-June due to high inflation and rising rate cycle.
Of the 16 fixed-income or debt fund categories, 12 saw net outflows during the month under review. Segments like liquid, money market and ultrashort-term duration funds saw huge withdrawals.
The only categories that saw inflows were overnight funds, long duration, gilt funds and gilt funds with a continuous tenor of 10 years.
Overnight fund category saw inflows of Rs 33,128 crores, long term inflows of Rs 111 crores, 10-year continuous duration gilt funds and gilt funds also saw inflows at low levels of Rs 6.64 crores and Rs 1.20 crores respectively Gone. ,
Kavita Krishnan, Senior Analyst- Manager Research, Morningstar India said, “From May 2022 onwards, due to the rising interest rate environment, investors have preferred to move from debt market to equities.
He further said that the overall macro environment is indicative of local and global slowdown. While the US Federal Reserve has been on a rate hike cycle, the RBI has also been raising interest rates in an effort to bring inflation under control. Also, a rising dollar is putting additional pressure on earnings, despite the positive impact on exporters.
He said another factor that could affect the inflows into debt funds is withdrawals by institutions to meet their obligations for advance tax payments. The overall sentiment towards debt funds has been to invest in short duration funds. This is also evidenced by the positive inflows in overnight funds during September.
Liquid funds saw a significant outflow of ₹59,970 crore in this category, followed by Money Market Funds (₹11,232 crore) and Ultra Short Duration Funds (₹8,454 crore).
“In the high inflation scenario, RBI is increasing the repo rate to moderate the inflation, due to which there is a possibility of volatility in the credit market. As the festive season is approaching, people need liquidity, which will increase the outflow. This could impact growth in the market,” said Priya Agarwal, Money Coach, LXME.
The outflow has reduced the asset base of debt mutual funds to Rs 12.41 lakh crore at the end of September, from Rs 13.03 lakh crore at the end of August.
On the other hand, equity mutual funds saw a net investment of ₹14,100 crore during the month under review.
The liquid, ultrashort-term, money market and overnight fund categories account for the bulk of the total assets (about 50 per cent) in the debt fund category.
Given their significant contribution, even a slight change in flow volume in percentage terms can make a huge difference in the overall flow within the category. The liquid and overnight categories also differentiate them due to the amount of institutional money they hold.