Outflows In Debt Mutual Funds Continue, Rs 13,815 Crore Withdrawn In Feb

Mutual funds focussed on investing in fixed-income securities witnessed an outflow of Rs 13,815 crore in February, making it the third month of withdrawals in a row regardless of expectations that the speed hike cycle was nearing its finish.

In comparability, such funds noticed an outflow of Rs 10,316 crore in January and Rs 21,947 crore in December.

Prior to that, debt funds noticed a internet infusion of Rs 3,668 crore in November 2022, knowledge from the Association of Mutual Funds in India (Amfi) confirmed.

Of the 16 fixed-income or debt fund classes, 9 witnessed internet outflows throughout the month underneath evaluation and the remaining six noticed influx. The heavy withdrawal was seen from liquid funds. Overall, debt funds continued to witness outflows at Rs 13,815 crore throughout the interval underneath evaluation.

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“With the central financial institution’s give attention to moderating inflation, the financial coverage has been tailor-made to make sure a disinflation course of. Despite expectations across the February charge hike of 25 foundation factors seemingly being amongst the final, largely owing to a moderation round inflation, buyers are but to see the proof. This additionally results in buyers funds with a shorter length as these supply decrease volatility,” Kavitha Krishnan, Senior Analyst – Manager Research, Morningstar India, mentioned.

Moreover, an increased focus towards other asset classes and the opening-up of newer avenues have also likely led to investors preferring these over debt fund categories, she said.

She, further, said the Indian market continues to witness growth, and a change in the rate hike cycle will likely bring investors back to debt funds.

Within the debt category, liquid funds saw a significant outflow of Rs 11,304 crore in this category, followed by ultra-short duration funds ( Rs 2,430 crore), low duration ration funds (Rs 1,904 crore) and floater funds (Rs 1,665 crore).

In terms of inflow, the overnight funds category witnessed the largest inflow of Rs 2,946 crore followed by the corporate bond (Rs 662 crore) dynamic (Rs 502 crore) and Gilt fund (Rs 451 crore).

The liquid, ultrashort-term, money market and overnight fund categories constitute a substantial portion of the total assets (about 50 per cent) within the debt fund category.

Given their significant contribution, even a slight change in the quantum of flows in percentage terms can make a huge difference in the overall flows within the category.

On the other hand, equity mutual funds attracted Rs 15,685 crore in February, making it the highest net infusion in nine months, driven by buoyant inflow from SIPs (Systematic Investment Plans).

The contribution from SIP has been averaging above Rs 13,000 crore-mark every month since October 2022.

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