Debt mutual funds see Rs 1.1 lakh cr inflow in October

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After recording outflow for two consecutive months, debt-oriented mutual fund schemes witnessed a staggering inflow of Rs 1.1 lakh crore in October, mainly due to investment in liquid funds, money market and short duration categories.

Deft mutual fund schemes had seen net outflow of Rs 51,962 crore in September and Rs 3,907 crore in August, according to the Association of Mutual Funds in India (Amfi).

Investors continue to focus on fixed income categories having relatively shorter duration profile. Hence significant flows have come in ultrashort, low duration, money market and short duration funds, said Himanshu Srivastava, Associate Director – Manager Research, Morningstar India.

Besides, funds with pristine credit quality, especially from categories such as banking and PSU funds and corporate bonds, continue to gain traction from investors, highlighting their preference for safety in this segment.

Mutual funds (MFs) that invest in fixed-income securities or debt funds saw an inflow of Rs 1.1 lakh crore in October, according to Amfi data.

Within debt schemes, liquid funds category was the biggest beneficiary with an inflow of Rs 19,583 crore followed by money market funds (Rs 15,445 crore) and short duration funds (Rs 15,156 crore).

Corporate bonds, ultra short duration funds, banking & PSU funds saw inflow of over Rs 15,000 crore, Rs 13,654 crore and Rs 5,554 crore, respectively.

Investors continue to tread a line of caution by staying away from riskier investments. Hence, credit risk category continue to witness net outflows, although the pace has slowed down significantly, Srivastava said.

Credit risk funds saw an outflow of Rs 415 crore in October as compared with outflow of Rs 539 crore in September, Rs 554 crore in August, Rs 670 crore in July, Rs 1,494 crore in June, Rs 5,173 crore in May and Rs 19,239 crore in April.

Gilt funds came back under investors’ radar in October after witnessing net outflow for two consecutive months.

The category saw fund infusion of Rs 2,521 crore last month following a net outflow of Rs 483 crore in September and Rs 1,121 crore in August.

“The sovereign status of this category, with zero credit risk, has been the biggest draw for investors. In addition to that, the category has performed well and that would have also attracted investors. That said, investors should be cognizant of the interest rate risk in these funds,” Srivastava said.

The assets under management of debt mutual funds rose to Rs 13.28 lakh crore at the end of October from Rs 12.87 lakh crore at the end of September.