The turnaround was primarily driven by robust inflows into liquid and overnight fund categories as institutional investors redeployed surplus cash following quarter-end withdrawals.
Institutional money drives recovery
Liquid funds led the surge with inflows of ₹89,375 crore, reversing September’s redemptions of ₹66,042 crore. Overnight funds attracted ₹24,051 crore.
Money market funds, too, saw strong inflows of ₹17,916 crore.
Broad-based rebound in shorter duration categories
Flows in the short-duration segment also turned positive, supported by investor preference for accrual-oriented strategies in a stable rate environment.
Ultra-short and low-duration funds contributed to the recovery, while corporate bond funds posted steady inflows of ₹5,122 crore compared with outflows in the previous month.
Credit risk funds, however, continued to face investor caution, recording modest outflows of ₹84 crore in October, though lower than September’s ₹256 crore.
Longer-duration funds see selective activity
Among longer-maturity segments, dynamic bond funds witnessed marginal outflows of ₹232 crore after two months of positive flows. Medium-to-long duration funds saw muted inflows of ₹17 crore, while gilt funds recorded outflows of ₹931 crore amid continued volatility in long-term yields and global rate uncertainty.
Ankur Punj, MD and Business Head, Equirus Wealth, said the shift in flows indicates that investors are turning to safer avenues. “The robust inflows into debt funds reflect a move toward lower-risk options for stability, as investors remain cautious amid global policy uncertainties and a softening in equity inflows,” he noted.
Outlook
According to Nehal Meshram, Senior Analyst at Morningstar Investment Research India, October’s rebound reflects “liquidity-driven institutional allocations rather than a structural shift in investor preference.”
She added that flows are likely to remain concentrated in liquid, money market, and high-quality accrual categories, with investors awaiting clarity on the timing and pace of future rate cuts before extending duration exposure.