Debt Mutual Funds Rebound in April, Attract Rs 2.19 Lakh Cr

New Delhi, May 12 (PTI) Debt-oriented mutual funds witnessed a sharp recovery in April, registering net inflows of Rs 2.19 lakh crore, after seeing withdrawals in the preceding two months.

This rebound follows the March outflows of Rs 2.02 lakh crore, which were primarily driven by typical fiscal year-end redemptions, especially by institutional investors seeking liquidity for advance tax payments and balance sheet adjustments, Nehal Meshram, Senior Analyst, Manager Research, Morningstar Investment Research India, said.

In February, the debt funds experienced an outflow of Rs 6,525 crore. However, in January, the category saw an inflow of Rs 1.28 lakh crore.

The latest inflow has lifted the assets under management of debt mutual funds to Rs 17.57 lakh crore in April from Rs 17.02 lakh crore in the preceding month, latest data with the Association of Mutual Funds in India (Amfi) showed.

Also, the investor base expanded significantly, with the number of folios increasing by 1.44 lakh to 79.36 lakh in April from 68.91 lakh in March.

Going by the data, the rebound in April was broad-based, with 12 out of 16 debt mutual fund categories witnessing net inflows.

"The surge in April inflows also reflects a return to normalcy and reaffirmed confidence in fixed income instruments, particularly among corporates redeploying idle cash following year-end disbursements," Morningstar's Meshram said.

Of the 16 categories, liquid funds witnessed the highest net inflows of Rs 1.18 lakh crore, reversing more than 89 per cent of their March outflows.

"A significant portion of the debt allocation was directed toward liquid and liquid-plus strategies, suggesting a preference for short-term parking of funds, possibly in anticipation of better deployment opportunities ahead," said Ankur Punj, MD and National Head Equirus Wealth.

In addition, overnight funds and money market funds attracted Rs 23,900 crore and Rs 31,507 crore respectively, as short-term instruments regained favour amid stable monetary conditions and strong liquidity.

The inflows also extended to ultra-short and low-duration funds, which garnered Rs 26,734 crore and Rs 9,371 crore, respectively, signalling renewed interest in slightly longer short-term strategies offering better risk-adjusted returns.

However, Gilt funds saw an outflow to the tune of Rs 425 crore, and credit risk saw a withdrawal of Rs 302 crore. In addition, the Gilt fund with a 10-year constant duration and the dynamic bond fund experienced an outflow of Rs 39 crore and Rs 10 crore, respectively.

Overall, the mutual fund industry experienced an infusion of Rs 2.77 lakh crore in April after the typical quarter-end outflows of Rs 1.64 lakh crore seen in the preceding month. This inflow has helped in driving the industry's asset base to a record Rs 70 lakh crore as of April from Rs 65.74 lakh crore in March-end.