Investors continue to focus on Fixed Income funds: AMFI data

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Updated: Nov 10, 2020 2:52 PM

Liquid Fund category was the biggest beneficiary followed by Money Market Fund and Short Duration Fund, according to AMFI’s monthly data for October 2020.

Stock Market, equity mutual funds, retail investors, Wealth, debt mutual fundIn 2021, we will continue to be still surrounded by uncertainties and slow growth.

After net outflows in September, most of the debt-oriented categories witnessed net inflows in the month of October. Liquid Fund category was the biggest beneficiary followed by Money Market Fund and Short Duration Fund, according to AMFI’s monthly data for October 2020.

Commenting on the same, Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, said, “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. In addition to that, funds with pristine credit quality, especially from categories such as Banking and PSU Fund and Corporate Bond, continue to gain traction from investors highlighting their preference for safety in this segment. Money Market funds have also been the beneficiary of this trend.”

This also means that 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.

The flows into Medium Duration category have stabilized over the last four months. Since July, the category has received net inflows of Rs 4,251.6 crore. In October alone, the net inflows amounted to Rs 1,566.1 crore. This category houses some credit-oriented strategies and suffered significantly during the March, April and May period of liquidity crises. “From March 2020 till June 2020, the category witnessed a net outflow of Rs 10,274 crore. However, since then, the credit profile of these funds has improved with higher investments in AAA or equivalent rated securities. Also, on the duration front, the category is positioned well in the current environment. This would have prompted investors to have a relook at the category,” said Srivastava.

After witnessing net outflows for two consecutive months, Gilt Funds came back under investors radar in October. After a net outflow of Rs 1,122.1 crore in August and Rs 483.0 crore in September, the category received a net inflow of Rs 2,521.5 crore in October. 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.

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