Debt MFs witnesses outflow for two successive months

In the month of September 2020, debt mutual funds clocked massive outflows, making it the second successive month of outflows. According to the monthly report from Association of Mutual Funds in India (AMFI), debt mutual funds witnessed an outflow of Rs 51,692 crore in September 2020 as against Rs 3,908 crore in August 2020.

In the previous four successive months of April 2020, May 2020, June 2020, and July 2020, debt mutual funds saw a net inflow of Rs 43,431 crore, Rs 63,665 crore, Rs 2,862 crore, and Rs 91,392 crore, respectively. September 2020, the month where the second quarter ended the debt mutual funds, expectedly saw substantial net outflows. This is because corporates move out of liquid funds at the end of every quarter to pay tax.

In the month of September 2020, liquid funds logged net outflows to the tune of Rs 65,952 crore, this is where most of the corporates park their money. This outflow was followed by ultra-short duration funds and money market funds that witnessed net outflows of Rs 4,867 crore and Rs 4,857 crore, respectively.

Further, when it came to investment in credit risk funds, investors kept themselves at bay. This was amid the credit crisis in the period from March to April that unpleasantly affected the fixed income markets. Hence, credit risk funds still continue to witness outflows. However, the pace of the same has dropped considerably. Credit risk funds saw an outflow of Rs 539 crore in the month of September 2020 as against Rs 554 crore in August 2020, Rs 670 crore in July 2020, Rs 1,494 crore in June 2020, Rs 5,173 crore in May 2020, and Rs 19,239 crore in April 2020.

Gilt funds too observed an outflow of Rs 483 crore in the month of September 2020. This is lower in comparison to the outflow of Rs 1,122 crore that was experienced in the month of August 2020. In the past one year, this category gave better returns which must have led to profit booking. However, it was successful in attracting investors in recent times due to its sovereign status and no credit risk whatsoever.

In fact, investors preferred funds with high credit quality such as banking and PSU debt funds and corporate bond funds. The banking and PSU debt funds category led the charts with a net inflow of Rs 6,416 crore in the month of September 2020. Further, short duration and low duration funds witnessed an inflow of Rs 3,853 crore and Rs 1,818 crore, respectively.

The overall assets under management (AUM) of debt mutual funds declined from Rs 12.61 lakh crore in August 2020 to Rs 12.14 lakh crore in September 2020.