The withdrawals came even as the overall mutual fund industry’s assets under management (AUM) rose to ₹82.22 lakh crore at the end of June from ₹81.58 lakh crore a month earlier.
The outflows were largely concentrated in categories used by institutional investors for short-term cash management.
Which debt categories saw the highest outflows?
Liquid funds witnessed the largest outflows at ₹42,293.3 crore in June, up from ₹29,681 crore in May. Corporate bond funds also recorded higher net outflows of ₹7,557.3 crore, compared with ₹7,010 crore in the previous month.
Industry commentary indicated that other short-tenor debt categories, including ultra-short-duration, low-duration, money market and overnight funds, also saw sizeable redemptions during the month.
What was behind the outflows?
Fund managers attributed the sharp withdrawals primarily to seasonal institutional cash requirements at the end of the June quarter.
Umesh Sharma, CIO–Debt at The Wealth Company Mutual Fund, said the outflows were mainly driven by heavy redemptions in ultra-short-term categories to meet predictable quarter-end liquidity requirements.
He added that redemptions from short-duration and corporate bond funds were notable, despite expectations that these categories could benefit from the Reserve Bank of India’s recent monetary policy measures.
Nitin Agrawal, CEO, Mutual Funds at InCred Money, said the bulk of the outflows came from liquid, overnight and money market schemes, which are widely used by corporate treasuries for cash management.
According to him, such movements are typically linked to quarter-end treasury operations and tax payment schedules rather than changes in long-term investor sentiment.
What is the outlook for debt funds?
Commenting on the debt market, Avnish Jain, CIO–Fixed Income at Canara Robeco Asset Management Company, said domestic bond markets have been supported by easing crude oil prices, moderating inflation and policy measures aimed at attracting foreign capital into debt markets.
He noted that government bond yields have declined in recent weeks, reflecting improved sentiment. Going forward, he said market direction will depend on factors including inflation trends, the progress of the monsoon, the government’s borrowing programme and the durability of foreign inflows. He added that the RBI is expected to remain on pause while assessing the evolving macroeconomic environment.
The June AMFI data also showed that equity-oriented schemes attracted ₹28,973 crore of net inflows during the month, while hybrid funds received ₹12,893 crore, partly offsetting the sharp outflows from debt-oriented schemes.