Debt funds shine in July, record cumulative net inflows of Rs 91,392 cr

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Updated: Aug 12, 2020 7:18 PM

At the aggregate level, open-ended debt funds recorded cumulative net inflows of ~Rs 91,392 crore, the highest since January 2020, when the figure stood at ~Rs 109,306 crore.

mutual fund, mutual fund investment, debt funds, liquid funds, low duration funds, Debt funds shine in JulyShort duration funds, corporate bond funds, and banking and PSU funds continue to attract investor attention due to the hunt for superior risk-adjusted returns.

In stark contrast to the fund flow trend in equity schemes, nearly all debt funds recorded sharp net inflows in July. Liquid funds attracted net inflows of ~Rs 14,055 crore, reversing the Rs 44,226 crore outflow recorded at end-June.

At the start of every quarter, institutional investors and corporate houses typically invest in liquid funds once their tax payment obligations have been completed, according to CRISIL Research.

Low duration funds attracted the highest net inflows among open-ended debt categories at ~Rs 14,219 crore, followed by corporate bond funds at ~Rs 11,910 crore and short duration funds at ~Rs 11,510 crore.

The only category to witness net outflows in the month were credit risk funds. The pace of outflows, however, reduced sharply, coming in at Rs 670 crore in July compared with Rs 1,494 crore in June. July marks the 16th consecutive month of net outflows for the category, which has been hit by credit and liquidity worries.

At the aggregate level, open-ended debt funds recorded cumulative net inflows of ~Rs 91,392 crore, the highest since January 2020, when the figure stood at ~Rs 109,306 crore. Resultantly, the category’s asset base increased ~8.7% on-month to Rs 12.64 lakh crore.

Commenting on the July AMFI data, Dr. Joseph Thomas, Head of Research, Emkay Wealth Management, said, “The net inflows into debt funds show a healthy uptick overall with an inflow close to Rs 91,400 crore. A major chunk of these inflows has been into funds with a short duration. It is very clear that investors are avoiding longer duration probably due to the expectation that there is likely volatility at the long end of the curve emanating from the issue of long-dated papers at the Gilts’ primary auctions.”

Short duration funds, corporate bond funds, and banking and PSU funds continue to attract investor attention due to the hunt for superior risk-adjusted returns, as these funds have the most appropriate duration positioning and excellent credit risk profile. “The outflows from equity are quite negligible and it may stabilize over the next few months. While we may see the current trend continuing to prevail in the shorter term, the course may be steadied on the availability of more macro data in the coming months,” he added.

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