According to AMFI data, liquid funds alone saw net outflows of ₹39,725 crore, while overnight funds recorded outflows of ₹8,600 crore. These two categories, which typically attract large institutional investments, are more susceptible to short-term liquidity needs and treasury decisions.
Despite the overall decline, several debt fund categories saw renewed investor interest. Corporate bond funds led the gains with inflows of ₹11,983 crore.
Analysts attribute this to attractive yields and a stable credit outlook.
Money market funds followed closely, collecting ₹11,223 crore in net inflows.
Their short maturity amid steady interest rates made them a preferred option for investors seeking moderate returns with lower risk.
Low duration and ultra short duration funds continued their positive trend. The former saw inflows of ₹3,133 crore, while the latter garnered ₹1,847 crore.
These categories tend to do well when investors want limited interest rate risk but better returns than traditional savings instruments.
For the first time in 2025, gilt funds also witnessed inflows, particularly in the regular gilt segment, which saw ₹1,386 crore coming in.
Nehal Meshram, Senior Analyst – Manager Research, Morningstar India, said the inflows into duration strategies like gilt and long-term debt funds likely stem from rising expectations of a prolonged rate cut cycle.
“As yields begin to soften in anticipation of accommodative monetary policy, long-term government securities become more attractive due to their potential for capital gains,” she noted.
This sentiment was also reflected in modest inflows into medium and long-duration categories, though the momentum remains cautious.
Overall, while short-duration strategies showed resilience, the broader debt fund segment was pulled down by treasury-driven redemptions in liquid and overnight funds.
Vikas Gupta, CEO & Chief Investment Strategist, OmniScience Capital, said that the debt fund outflows highlight how investors are shifting their focus toward equities.
“Investors are clear that there is better upside in equities than debt from an interest cutting cycle,” he added.