Investments in fixed income funds gained traction in 2016-17, with the mutual fund industry seeing an inflow of nearly Rs 1.77 lakh in such instruments seen as safe havens. In comparison, investors had pumped in Rs 28,786 crore in fixed income or debt funds in 2015-16, according to mutual fund tracker Morningstar.
Within fixed income, accrual strategy funds saw a huge inflow in the last fiscal. Besides, short-term bond category funds garnered a net inflow of around Rs 95,500 crore, credit opportunity strategy funds witnessed an infusion around Rs 29,100 crore.
On the other hand, intermediate bond, generally referred to as income funds, saw a net outflow of about Rs 9,600 crore in 2016-17. “These fund flows have been largely influenced by RBI’s decision of not reducing interest rates in December and later a changing its stance from accommodative to neutral in February,” Morningstar Advisor India Director Portfolio Strategist Dhaval Kapadia said.
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Analysts are of the view that investments in debt schemes would continue as banks, which are one of the largest investors in liquid funds, are currently flush with funds. Besides, investors are opting for fixed income funds as they are more tax efficient and carry a lower risk.
Apart from debt funds, equity mutual funds witnessed a net inflow of Rs 54,960 crore in the past fiscal, lower than Rs 70,817 crore seen in 2015-16. Out of this, arbitrage funds witnessed an inflow of Rs 13,300 crore, large-cap (Rs 11,300 crore), small and mid-cap (Rs 8,600 crore). Balanced funds, which invest in debt and equity, gathered a net inflow of around Rs 30,658 crore in last financial compared with a net inflow of Rs 19,665 crore in 2015-16.
Moreover, gold exchange-traded funds (ETFs) saw a net outflow of Rs 695 crore in last financial year. However, large-cap ETF category witnessed an inflow of around Rs 17,000 crore mainly due to investments made by the EPFO.