October Surge: Debt Mutual Funds Reeling in Record Inflows

In October, debt mutual funds in India saw a net inflow of Rs 1.57 lakh crore, recovering from huge redemptions in September. Liquid schemes drove the recovery, with inflows into equity-oriented funds also hitting record levels. Interest in active duration strategies increased amidst anticipation of rate cuts.

Debt-oriented mutual funds made a remarkable comeback in October, recovering from significant outflows in September with a net inflow of Rs 1.57 lakh crore. This surge was propelled mainly by liquid schemes and was accompanied by an overall mutual fund industry inflow of Rs 2.4 lakh crore.

The data from the Association of Mutual Funds in India (Amfi) highlights a robust performance across different categories. Out of 16 debt mutual fund categories, 14 witnessed net inflows. However, medium-duration and credit risk funds remained the exceptions with continued outflows. Liquid funds spearheaded the influx with Rs 83,863 crore, with overnight and money market funds also showing strong figures.

Nehal Meshram, Senior Analyst at Morningstar Investment Research India, noted a corporate inclination towards low-risk, highly liquid funds following tax settlements. Inflows are particularly robust in the ultra-short duration segment, whereas banking and PSU funds have finally experienced a breakthrough in inflows after months. As investors bank on anticipated rate cuts, active duration strategies are gaining traction, with gilt and long-duration funds seeing increased interest.

(With inputs from agencies.)