September witnessed a sharp reversal in India’s fixed-income mutual funds, with investors pulling out ₹1.02 lakh crore, a steep jump from the modest ₹7,980 crore outflows in August, according to data from the Association of Mutual Funds in India (AMFI).
Liquid and Money Market Funds Hit Hardest
Liquid funds faced the largest withdrawals, totaling ₹66,042 crore, while money market funds saw redemptions of ₹17,900 crore. The trend indicates heightened risk aversion among investors, even toward short-term debt instruments, amid ongoing market uncertainty.
Overnight and Short-Duration Funds
Overnight funds were the exception, reporting inflows of ₹4,279 crore, reflecting investors’ preference to park cash temporarily.
However, ultra-short duration funds experienced significant pressure, with ₹13,606 crore in outflows. Low-duration and short-duration funds saw redemptions of ₹1,253 crore and ₹2,173 crore, respectively.
Medium- and Long-Duration Funds Stable
Medium-duration funds remained largely steady, with marginal outflows of ₹157 crore, while medium-to-long duration funds even recorded a small inflow of ₹103 crore.
Credit Risk and Gilt Funds Face Caution
Investor sentiment toward credit risk and gilt funds remained cautious, with net redemptions of ₹256 crore and ₹615 crore, respectively, reflecting reluctance toward lower-rated or longer-tenor instruments in a volatile market environment.
Outlook
The sharp September outflows highlight a shift in investor preference from debt to more liquid or shorter-term instruments, underscoring caution amid uncertain interest rate trends and market volatility.
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