July 19, 2022
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Debt MFs massive outflow in June, Rs 92248 cr withdrawn !!
Debt Mutual funds ( eg.the funds focused on investing in fixed-income securities ) witnessed a heavy outflow of Rs 92,248 crore in June due to high expectations around an increasing rate cycle, higher commodity prices and slowdown in growth.Out of the 16 fixed-income or debt fund categories, 14 witnessed net outflows during the month under review. The heavy withdrawal was seen from segments, such as overnight, liquid and ultrashort-term duration funds.
This comes following a net outflow of Rs 32,722 crore in May and an inflow of Rs 54,756 crore in April, data available with Amfi indicates.The outflow has pulled down the asset base of debt mutual funds to Rs 12.35 lakh crore by June-end from Rs 13.22 lakh crore at the end of May.
The only categories that witnessed inflows were the 10-year gilt funds and the long duration funds. One of the reasons for the net outflow could be a sign of investors’ short-term money requirements .
The liquid, ultrashort-term, money market and overnight fund categories constitute a substantial portion of the total assets (about 50 per cent) within the debt fund category.Outflows for the month of June were largely driven by the overnight funds, liquid funds and ultrashort-term duration fund categories with the outflow figures for these categories standing at Rs 20,668 crore, Rs 15,783 crore and Rs 10,058 crore, respectively.
Debt MFs massive outflow in June : Reasons :An uncertain macro environment, driven by expectations around an increasing rate cycle, higher commodity prices and slowdown in growth have likely led to investors steering clear of debt funds
Single-digit returns, rising bond yields and the rising inflation have also likely led to investors choosing to redeem their investments in debt funds in favour of other investment avenues.
In addition, corporates and businesses choosing to take out their short-term money parked in overnight and/or liquid funds for their business activities has also likely led to the outflows across these categories.
Generally, debt funds are considered to be less risky, with investors taking comfort in being able to hedge their risks by parking hard-earned money in instruments that provide better returns than bank fixed deposits.
On the other hand, equity mutual funds attracted a net sum of Rs 15,498 crore in June amid heightened volatility in stock market environment .
Debt MFs massive outflow in June : Effect On the whole, the mutual fund industry registered a net outflow of Rs 69853 crore last month as compared to a net pull out of Rs 7,532 crore in May.
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