Having witnessed net outflows in September, Debt-oriented funds received net inflows to the tune of Rs 12,984.38 crore in October, according to AMFI monthly data for October 2021.
The net outflows were largely from Liquid Fund, Short Duration Fund, Banking and PSU Fund, Corporate Bond Fund, Long Duration Fund and Gilt Fund with 10-year constant duration categories. Other categories witnessed net inflows.
“Liquid funds witnessed the highest net outflows as investors might have chosen to unpark their short-term money from these funds and invest in other attractive investments such as equities. Additionally, given October being a festive season would have also led investors and corporates to redeem their investments from these funds,” said Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, commenting on the AMFI data.
With the underlying interest rate environment, investors chose to mostly invest in less than one-year segments. Hence, Ultra Short Duration Funds, Low Duration Funds and Money Market Funds received robust flows.
“Categories such as Medium Duration and Medium to Long Duration continued to receive net inflows, thus indicating investors’ preference for fixed income funds at short to medium end of the curve. What makes Medium Duration category appeal to investor is the conservative approach towards credit. Although there has been an improvement in their credit profile, they have emerged as the investment vehicle offering a mix of credit approach along with investments in highly rated securities. Thus, investors get to benefit from both,” added Srivastava.
Credit Funds also witnessed net inflows for the sixth month in a row on the back of improvement in scenario on the fixed income side, particularly in the lower credit space. The relatively lesser quantum of monthly net inflows in the category does signify that investors continue to take calculated risk by allocating some portion of their investments in credit funds and are not going overboard.
“Investors also showed their interest in Dynamic Bond Fund category given their ability to better navigate through the interest rate volatility. That said, a lot depends on the fund manager view on interest rate and a wrong call or misjudgement of the scenario could lead to underperformance in these funds,” Srivastava said.
Floater funds continue to receive net positive flows given the limited probability of interest rates moving down significantly. With a net inflow of Rs 5,049.75 crore, it was the second biggest beneficiary in October among the debt-oriented categories, after Overnight Funds which received a net inflow of Rs 6,337.28 crore.