The decline was led by heavy redemptions in liquid funds as institutional investors adjusted allocations ahead of advance tax payments and quarter-end liquidity requirements.
“Liquid fund flows are highly sensitive to short-term cash management cycles. After July’s surge, August naturally saw a pullback as institutional investors trimmed allocations,” said Nehal Meshram, Senior Analyst – Manager Research, Morningstar Investment Research India.
Despite the overall negative flows, certain segments remained resilient.
Overnight funds attracted ₹4,694 crore.
Money market funds, which had seen record inflows in July, added ₹2,210 crore in August, though at a slower pace.
Investor demand for short-duration carry strategies also held firm. Short Duration, Low Duration, and Ultra Short Duration funds collectively saw inflows of around ₹1,416 crore.
On the other hand, Corporate Bond and Banking & PSU funds posted combined outflows of roughly ₹1,625 crore, as investors booked profits and pivoted to more liquid, shorter-tenor options.
The August trend highlights the cyclical nature of institutional participation in debt funds, with liquidity-driven categories like liquid funds showing sharp monthly swings, while shorter-tenure and overnight strategies continue to attract steady allocations.
First Published: Sept 10, 2025 5:01 PM IST