The month-on-month swing was largely driven by overnight funds, which saw net outflows of ₹30,654 crore in August.
This was a sharp reversal from the ₹40,412.55 crore inflow recorded by overnight funds in July.
Overnight funds invest in securities with a maturity of one day and are generally used for very short-term parking of money. Flows in the category can therefore be more volatile as investors move money in and out depending on short-term cash and liquidity requirements.
Despite the overall outflow from debt funds, some categories continued to attract money in August. Liquid funds received ₹19,934.29 crore, while money market funds attracted ₹11,734.71 crore.
At the same time, short-duration funds recorded outflows of ₹4,258.56 crore, while corporate bond funds saw outflows of ₹3,190.17 crore.
The sharp reversal in debt-fund flows came even as equity mutual funds continued to attract money. Equity-oriented schemes recorded net inflows of around ₹29,328 crore in August, up nearly 19% from July.
Within equity funds, small-cap schemes attracted ₹7,973 crore, followed by mid-cap funds at ₹6,989 crore and flexi-cap funds at ₹5,059 crore. Large-cap funds, however, recorded an outflow of ₹1,147 crore.Santosh Joseph, CEO of Germinate Investor Services, said the August data showed continued investor interest in mid- and small-cap funds, while SIP contributions remained consistently around the ₹30,000-crore level.
He also pointed to the sustained outflows from ELSS funds, saying the reduced relevance of Section 80C deductions under the new tax regime has affected the category’s appeal.
Meanwhile, equity SIP contributions reached a record ₹32,297 crore in August, highlighting continued regular investment flows even as market conditions remained mixed.
For debt funds, however, the August numbers underline the difference between longer-term investment flows and categories that are often used for short-term cash management. The large movement in overnight-fund flows was the biggest factor behind the sharp month-on-month reversal in overall debt flows.