Fixed-Income Fund Outflows Analyzed

In September, investors pulled a massive amount of money out of fixed-income mutual funds – a staggering Rs 1.02 lakh crore. This is significantly more than the Rs 7,980 crore that left in the previous month. Most of this money left from funds that hold cash, called liquid and money market funds.

Key Points

Here’s what you need to know:

• Investors withdrew over Rs 1 lakh crore from fixed-income funds.
• Liquid and money market funds were the biggest drivers of this shift.
• Twelve of sixteen debt categories experienced net outflows during the month.
• Overall, fixed-income fund assets dropped by nearly 5%.
• Equity funds saw increased investment, contrasting the fixed-income trend.
• Seasonal liquidity adjustments and taxes played a crucial role.

This large outflow reduced the total value of these funds by almost 5% to Rs 17.8 lakh crore. Liquid funds saw the biggest withdrawals – Rs 66,042 crore, and money market funds followed with Rs 17,900 crore. Ultra-short duration funds also reduced their holdings by Rs 13,606 crore.

However, some funds saw a slight increase in investment. Overnight funds pulled in Rs 4,279 crore, and the dynamic bond category received Rs 519 crore. Medium to long-duration funds also attracted small investments – Rs 103 crore and Rs 61 crore, respectively.

Equity funds, on the other hand, saw a rise in investment, pulling in Rs 30,421 crore in September. This was lower than the previous month’s Rs 33,430 crore, and significantly less than the record-breaking Rs 42,703 crore seen in July. Investors were more cautious due to market changes and global issues.

“The shift in fixed-income funds reflects common seasonal patterns, alongside wider market uncertainties.” – Nehal Meshram, Morningstar Investment Research India.