RBI's liquidity tightening : It's business as usual for MFs in July

Corporates came to the rescue as banks started redeeming funds

It's business as usual for India's mutual fund houses. The tsunami of redemptions which got triggered following the central bank's severe liquidity tightening measures last month didnot impact the fund industry as much as it was feared.

The fund category in line of fire was primarily debt funds - including income and money market funds. There was knee-jerk reaction to the Reserve Bank of India's move, but things settled down sooner than later.

According to the latest statistics available from the industry body Association of Mutual Funds in India ( Amfi ), the liquid and money market funds witnessed a mere rise of a Rs 1,000 crore when compared to the immediate previous month. To put in actual numbers, month of July saw a net outflow of Rs 45,296 crore, which stood at Rs 44,300 crore in June.

Industry officials said that corporates came to the rescue, to a large extent, as they went into shopping spree while banks were busy redeeming funds to secure easy liquidity upon RBI's actions.

Interestingly, income funds had, in fact, a decline in net outflows during the month.  It reduced to Rs 2,657 crore from Rs 4,501 crore in the previous month.