Debt Funds Rebound With Rs 1.6 Lakh Crore Inflows In October: What Does It Indicate? | Markets News

Out of 16 debt categories, 10 registered net inflows in October.

Fixed-income mutual funds staged a strong rebound in October, drawing net inflows of Rs 1.6 lakh crore after witnessing heavy redemptions of Rs 1.02 lakh crore in September. The sharp recovery was driven primarily by robust allocations to liquid and overnight funds, reversing the previous month’s quarter-end outflows.

The surge in inflows pushed the assets under management (AUM) of debt-oriented schemes up by nearly 10%, rising from Rs 17.8 lakh crore in September to Rs 19.51 lakh crore in October, according to data from the Association of Mutual Funds in India (Amfi).

Amfi data showed that debt funds recorded a net inflow of Rs 1.6 lakh crore in October, compared with outflows of Rs 1.02 lakh crore in September and Rs 7,980 crore in August. July had seen a sizeable inflow of Rs 1.07 lakh crore.

Out of 16 debt categories, 10 registered net inflows in October.

Liquid funds led the recovery with inflows of Rs 89,375 crore, bouncing back from outflows of Rs 66,042 crore in September.

Overnight funds saw inflows of Rs 24,051 crore, reflecting short-term treasury deployments as liquidity improved following tax-related and quarter-end adjustments.

Money market funds attracted ₹17,916 crore, indicating the return of institutional cash to short-duration instruments.

Short-duration categories also rebounded as investors redeployed money into accrual-oriented schemes amid stable liquidity and attractive yields. Ultra-short and low-duration funds drove this recovery, while corporate bond funds maintained steady inflows of Rs 5,121 crore.

However, riskier segments continued to lag. Credit risk funds remained under pressure, reflecting sustained caution toward lower-rated securities.

Dynamic bond funds logged marginal outflows of Rs 232 crore, and Gilt funds saw redemptions of Rs 931 crore due to volatility in long-term yields influenced by shifting global rate expectations.

On the equity side, mutual funds garnered inflows of Rs 24,690 crore in October, though this was 9% lower than the Rs 30,421 crore recorded in September.

What Does It Indicate?

Fund flows are expected to stay focused on liquid, money market, and high-quality accrual categories as investors wait for greater clarity on the timing and pace of potential rate cuts, said Nehal Meshram, senior analyst at Morningstar Investment Research India.

“The turnaround in October was largely driven by robust inflows into liquid and overnight funds, as institutional investors redeployed surplus cash after the quarter-end outflows observed in the previous month,” Meshram added.