Debt MFs log Rs 1.57 trn inflow in Oct on investment in liquid schemes

Within the debt fund, liquid funds led the inflows with Rs 83,863 cr, accounting for 53 per cent of the total, followed by overnight funds and money market funds with Rs 25,784 cr and Rs 25,303 cr

Debt-oriented mutual funds witnessed a strong recovery in October, driven by investments in liquid schemes and attracting a net inflow of Rs 1.57 trillion after huge redemptions in the previous month.

Notably, 14 of 16 debt mutual fund categories reported net inflows during the month, while medium-duration and credit risk funds maintained their trend of consistent outflows.

The positive inflow boosted the asset base of debt mutual funds by 11 per cent to Rs 16.64 trillion in October-end from Rs 14.97 trillion at the end of September, according to data with Association of Mutual Funds on India (Amfi).

As per the data, debt mutual funds attracted inflows of Rs 1.57 trillion in October, marking a sharp reversal from the outflows of Rs 1.14 trillion recorded in September.

Within the debt fund, liquid funds led the inflows with Rs 83,863 crore, accounting for 53 per cent of the total, followed by overnight funds and money market funds with Rs 25,784 crore and Rs 25,303 crore, respectively.

"Corporates typically channel surplus funds into liquid and money market funds post-tax settlements in September, reflecting a preference for these low-risk, highly liquid options," Nehal Meshram, Senior Analyst, Manager Research, Morningstar Investment Research India, said.

Further, the ultra-short duration segment -- less than 12 months -- is experiencing good inflows compared to the medium- to longer-term segments. The segment has seen inflow of Rs 7,054 crore.

Investors favoured funds with shorter maturity profiles for temporary placements, with low-duration funds, corporate bond funds, and short-duration funds attracting inflows of Rs 5,600 crore, Rs 4,644 crore, and Rs 1,362 crore, respectively.

Additionally, after four consecutive months, banking and PSU funds have seen huge inflows to the tune of Rs 936 crore.

In recent months, anticipation of a rate cut has fuelled interest in active duration strategies, with these funds positioned to benefit from potential interest rate declines.

In October, gilt funds experienced inflow of Rs 1,375 crore, while long-duration bonds saw Rs 1,117 crore. Inflows into these funds are expected to rise further once the rate easing cycle begins.

Apart from debt funds, investors pumped in a record Rs 41,887 crore in equity-oriented mutual funds during the month under review against an investment of Rs 34,419 crore.

Overall, the mutual fund industry witnessed an inflow of Rs 2.4 trillion in the month under review, after an outflow of Rs 71,114 crore in September. The huge inflow was due to investments into debt schemes.