Gilt funds lose sheen; category sees first outflows in seven months

Debt fund managers say continuation of higher returns in the segment unlikely

Gilt funds, which primarily invest in government securities (G-Sec), seem to be loosing favour among investors. The asset class, which saw sudden rise in interest in the second half of FY13, has registered first net outflows in the last seven months.

Debt fund managers had been hinting towards slowdown in inflows to Gilt funds of late as the kind of returns made in this category funds were unlikely to be sustained going forward.

And it came true as in March as net flows in the Gilt funds went back to the negative territory after flying high over the last few months.

Interestingly, from October last year to January 2013, Gilts were the only category which saw consistent flows of fresh money exceeding Rs 1,000 crore every month.

Expectations of interest rate cuts have made debt fund managers increase their allocation to G-Sec to one of their highest levels in recent past. It can be gauged from the fact that exposure in G-Sec had been hovering around 9-10% of the total debt assets recently which earlier was at a mere 1.5%.

Higher inflows in the later months of FY13, made Gilt schemes to garner overall fresh money flows of close to Rs 4,000 crore, which during the previous financial year stood in a negative territory at Rs 20 crore.

Table : Showing flows of funds in Gilts in FY13
Month	Net inflows (Rs Crore)
March	-167
Feb	+446
Jan	+1145
Dec	+985
Nov	+1006
Oct	+1018
Sept	+39
Aug	-31
July	+21
June	+115
May	-371
April	-230

Source : Association of Mutual Funds in India (Amfi)