The category saw net inflows of ₹1.38 lakh crore in FY25, reversing the ₹23,000 crore net outflows recorded in FY24.
This shift has been attributed to improved liquidity conditions, a favourable interest rate environment, and changes in the yield curve.
Among all debt categories, liquid and money market funds saw the highest inflows during the year. The AUM of money market funds increased by 56.3%, from ₹1.48 lakh crore in March 2024 to ₹2.32 lakh crore in March 2025.
Liquid funds reported a 20.4% rise in AUM, reaching ₹4.37 lakh crore during the same period.
Low duration funds also saw growth, with AUM rising 25.2% to ₹1.12 lakh crore. Gilt funds and long duration funds reported AUM increases of 50.3% and 59.3%, respectively.
April 2025 witnessed the highest monthly inflows into debt schemes since January 2005, as per AMFI.
Commenting on the development, Vaibhav Porwal, Co-Founder of Dezerv, said, “The substantial net inflows into debt-oriented schemes in April reflect investors’ strategic positioning. The preference for liquid, money market and ultra-short duration funds suggests investors are prioritising safety and liquidity while maintaining yield.”
He added that current yield levels and expectations of limited further rate cuts have supported investor interest in fixed income.
According to him, the reversal from outflows in FY24 to record inflows in FY25 indicates a renewed focus on the role of debt funds in offering portfolio stability.
Outlook
Industry data suggests that investors are using debt mutual funds to navigate current market conditions with a focus on capital preservation and predictable returns. The continued demand across short and long-duration funds signals a broad-based revival in the segment.