November 11, 2024

Debt mutual funds stage strong recovery in October with ₹1.57 lakh crore inflows

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After experiencing significant outflows in September, debt-oriented funds bounced back strongly in October, with inflows totaling ₹1.57 lakh crore. This marked a reversal from the previous month’s outflow of ₹1.14 lakh crore.

A total of 14 out of 16 debt mutual fund categories recorded net inflows, with liquid funds leading the pack, drawing in ₹83,863 crore, or 53.28% of the total.

Overnight funds and money market funds also saw robust inflows of ₹25,784 crore and ₹25,303 crore, respectively, reflecting corporates’ preference for low-risk, highly liquid options following tax settlements in September.

Nehal Meshram, Senior Analyst at Morningstar Investment Research India, explained that investors are currently favoring funds with shorter maturity profiles, such as corporate bond funds, low-duration funds, and short-duration funds, for temporary placements.
“This preference for short-duration funds reflects caution in the market amid uncertain interest rate movements,” said Meshram.

Banking and PSU funds also saw substantial inflows of ₹936 crore, marking a rebound after four months of subdued performance.

Meshram noted that the anticipation of interest rate cuts has fueled interest in active duration strategies, positioning these funds to benefit from potential rate declines.

In October, gilt funds attracted ₹1,376 crore, and long-duration bonds received ₹1,117 crore, with further inflows expected as the rate easing cycle unfolds.

“Investors are positioning themselves ahead of a potential rate cut, making duration funds more attractive,” Meshram added.

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