According to AMFI data, debt mutual funds saw net outflows of ₹2.94 lakh crore during March, compared with inflows of ₹42,106 crore in February.
The reversal was largely driven by heavy withdrawals from short-term and liquidity-oriented segments. Liquid funds recorded the highest outflows at ₹1.34 lakh crore, followed by overnight funds, money market funds, and low duration funds, which saw outflows of ₹40,228 crore, ₹29,207 crore, and ₹25,227 crore respectively.
Corporate bond funds also witnessed net outflows of ₹15,293 crore, compared with ₹2,302 crore in February. Credit risk funds saw outflows of ₹329.66 crore, while ELSS debt-linked flows remained marginally negative at ₹437.3 crore versus ₹650 crore in the previous month.
According to Nehal Meshram, Senior Analyst at Morningstar Investment Research India, the sharp reversal in debt fund flows was concentrated in short-term and treasury-oriented categories, indicating that quarter-end institutional and corporate liquidity management played a key role in driving the trend.
Meshram noted that open-ended income and debt-oriented schemes together recorded net outflows of ₹2.94 lakh crore in March, marking a sharp reversal from the relatively stable flows seen in earlier months.
She added that liquid, overnight, and money market funds accounted for the bulk of the weakness, reflecting seasonal cash management activity rather than a structural shift in sentiment.
She further pointed out that even relatively high-quality accrual categories such as short duration and corporate bond funds witnessed pressure, suggesting broad-based but liquidity-driven redemption activity rather than credit stress.
Gilt funds also continued to see outflows, indicating muted investor appetite for duration strategies.
Market participants noted that such sharp swings in debt fund flows are typically driven by institutional treasury adjustments around quarter-end and financial year-end, rather than long-term allocation changes.