Debt MF investors log outflow in August on withdrawal from overnight, liquid funds

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Updated: Sep 21, 2020 4:32 PM

After recording net inflows for four months in a row, debt-oriented schemes witnessed a net outflow of Rs 3,907 crore in August, largely on the back of a significant pull out from overnight and liquid fund categories.

The Covid outbreak and oil price shock have lad to sharp economic contractions and fiscal deteriorations globally, including in the Gulf region, according to Fitch Ratings.

After recording net inflows for four months in a row, debt-oriented schemes witnessed a net outflow of Rs 3,907 crore in August, largely on the back of a significant pull out from overnight and liquid fund categories. Investors are focusing on fixed income categories having relatively shorter duration profile, such as ultrashort and low duration, given the current interest rate scenario, Morningstar India Associate Director – Manager Research Himanshu Srivastava said. According to the Association of Mutual Funds in India (Amfi), mutual funds (MFs) that invest in fixed-income securities or debt funds saw an outflow of Rs 3,907 crore in August as compared with an inflow of Rs 91,392 crore in the preceding month.

Debt funds had seen inflow of Rs 2,862 crore in June, Rs 63,665 crore in May and Rs 43,431 crore in April.
The latest outflow was largely on the back of significant withdrawals from overnight fund and liquid fund categories, Srivastava said. Groww co-founder and COO Harsh Jain said the outflow could be on account redemptions by corporates to pay advance tax in September. Liquid schemes recorded a net outflow of Rs 15,814 crore and overnight fund saw a net withdrawal of Rs 10,298 crore. However, ultrashort and low duration categories witnessed net inflows of Rs 5,428 crore and Rs 5,368 crore, respectively.

Besides, funds with good credit quality, especially from money market, corporate bond and banking and PSU categories, continued to gain investor traction, highlighting their preference for safety. The money market, corporate bond and banking and PSU funds saw inflows of Rs 7,911 crore, Rs 1,955 crore and Rs 701 crore, respectively, in August. Investors continue to tread a line of caution by staying away from riskier investments, given the credit crisis in the March-April period which adversely impacted fixed income markets. Hence, credit risk category continues to witness net outflows, although the pace has slowed down significantly, Srivastava said.

Credit risk funds saw an outflow of Rs 554 crore in August, lower than outflow of 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, which have attracted investors’ interest in recent times given their sovereign status and zero exposure to credit risk, experienced net outflow of Rs 1,122 crore in August. The performance of the category this year so far has been good which would have prompted investors to book profits, Srivastava said. The assets under management of debt mutual funds dropped to Rs 12.61 lakh crore at the end of August from Rs 12.64 lakh crore at July-end.

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