Mutual funds focused on fixed-income securities witnessed a 95% month-on-month slump in inflow to Rs 2,862 crore in June, mainly due to redemptions in liquid schemes.
Most individual categories that invest in fixed-income securities, or debt funds, saw an inflow. However, liquid schemes and credit risk funds saw withdrawals.
According to the Association of Mutual Funds in India (Amfi), mutual funds (MFs) that invest in fixed-income securities saw an inflow of Rs 2,862 crore as compared with inflow of Rs 63,665 crore in May.
In April, the segment had witnessed an inflow of Rs 43,431 crore. Investors had pulled out a massive Rs 1.95 lakh crore from the segment in March, but had invested Rs 28,000 crore in February and Rs 1.09 lakh crore in January.
“The flows into fixed-income funds came down significantly in June from the previous month. However, that’s not surprising given it was quarter-end, and expectedly, liquid fund category witnessed huge net outflows,” Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, said.
Harsh Jain, co-founder of Groww, attributed the lower inflow to large amount of redemptions in liquid funds by corporate companies that withdraw to pay advance tax.
This is a routine behaviour that has been observed in the past as well, he said.
Of the total inflow seen last month, liquid funds with investments in cash assets such as treasury bills, certificates of deposit and commercial paper for shorter horizon, saw outflow of Rs 44,226 crore as against investment of Rs 61,870 crore in May.
Apart from liquid funds, credit risk funds saw an outflow of Rs 1,494 crore in the period under review, which was much lower than withdrawal of Rs 5,173 crore in May and Rs 19,239 crore in April.
However, low duration category saw inflow of around Rs 12,236 crore and corporate bond funds saw inflow of Rs 10,737 crore.
Given the recent credit crisis that adversely impacted fixed-income markets, investors continue to tread a line of caution by staying away from riskier investments. Hence categories such as credit risk and medium duration, which also comprise of funds that take credit bets, continue to witness net outflow, Srivastava said.
On the other hand, funds that do not cut corners with credit risk, especially from categories such as money market, short duration, corporate bond and banking and PSU, continue to gain investor traction, he added.
Gilt fund category continued receiving net inflow from investors on expectation of further cut in rates, and given their sovereign status, Srivastava said.
On the other hand, investors pumped Rs 240 crore in equity-oriented mutual funds last month, which is 95 per cent lower than Rs 5,256 crore invested in May.
Overall, the mutual fund industry witnessed a net inflow of Rs 7,265 crore across all segments last month, much lower than Rs 70,813 crore seen in May. This is primarily due to outflow from liquid funds.
The assets under management of the 45-players mutual fund industry rose to Rs 25.5 lakh crore in June-end from Rs 24.55 lakh crore in May-end.