June saw Rs32722 crore net outflow from debt mutual funds

12 Jul 2022 , 02:41 PM

In June, mutual funds that specialize in investing in fixed-income securities saw a significant outflow of Rs92,248 crore due to the macroeconomic environment’s uncertainty, which was fuelled by predictions surrounding an escalating rate cycle, rising commodity prices, and a slowdown in GDP.

The Association of Mutual Funds in India (Amfi) data available at the time revealed a net outflow of Rs32,722 crore in May and an inflow of Rs54,756 crore in April.

In the month under review, 14 of the 16 fixed-income or debt fund categories had net outflows. categories like overnight, liquid, and ultrashort-term duration funds had significant withdrawals. The 10-year gilt funds and long-duration funds were the only categories to see inflows.

By the end of June, the asset base of debt mutual funds had decreased from Rs13.22 lakh crore at the end of May to Rs12.35 lakh crore. A sizeable chunk of the total assets (about 50%) within the debt fund category is made up of the liquid, ultrashort-term, money market, and overnight fund categories.

Given their substantial contribution, even a little adjustment in the percentage quantity of flows can have a big impact on the total flows within the category. Because of how much institutional money flows into them, the categories of liquid and overnight also stand out.

The categories of overnight funds, liquid funds, and ultrashort-term duration funds accounted for the majority of the outflows during the month of June, with respective outflow statistics of Rs20,668 crore, Rs15,783 crore, and Rs10,058 crore.

Debt funds are typically thought to be less dangerous, and investors find comfort in the fact that they may manage their risks by investing their hard-earned money in things that offer higher returns than bank fixed deposits.

In contrast, equities mutual funds brought in a net amount of Rs15,498 crore in June despite increased market volatility and persistent selling by foreign portfolio investors (FPIs).

In order to attain long-term financial goals, investors are increasingly choosing equities because it is recognized as a value-creating asset class. This increased knowledge among investors is fuelling the development of investments in equity-oriented schemes.

Compared to a net pull-out of Rs7,532 crore in May, the mutual fund sector overall saw a net outflow of Rs69,853 crore last month.