Open ended revenue or debt-oriented categories of mutual funds witnessed a net outflow of Rs 33,408.76 crore in January 2021, compared with the net inflow of Rs 13,862.76 crore in December 2020. This could be largely attributed to the massive net outflow from liquid fund category in the course of the month, which amounted to Rs 45,315.69 crore.
“Liquid funds are typically used by many businesses to park their money for a short period of time. The outflow from the category could be a result of these businesses pulling their money out for meeting liquidity requirement at the start of the year,” stated Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, commenting on fixed revenue funds based on AMFI’s month-to-month information for January ’21.
The other categories that witnessed net outflows in the course of the month are Low Duration Fund, Money Market Fund, Medium to Long Duration Fund, Long Duration Fund and Gilt Fund.
In line with the interest price situation in the nation, investors continue to concentrate on fixed revenue categories possessing brief to medium duration profile. Hence categories such as Short Duration, Medium Duration, Corporate Bonds and Banking and PSU Fund continue to get robust investments. Categories like Dynamic Bond Fund, exactly where taking active duration calls is element of the technique to advantage from altering interest price atmosphere, also received excellent net inflows. These categories combined received a net inflow of Rs 16,688.15 crore via the month.
“With net inflow of Rs 6,892.63 crore, Short Duration Fund category was the biggest beneficiary during the month, followed by the Corporate Bond category which garnered net inflow of Rs 5,428.51 crore. While the funds from the corporate bond category are relatively safer investment options given limited scope to take credit bets, many funds from the short duration category too ply a relatively cautious investment approach. Also, their positioning on the duration front is largely in line with the current environment. These aspects have caught investor interest towards these categories in the recent times, especially when safety has been a big draw,” stated Srivastava.
After witnessing constant net outflows considering that April 2019 and losing net assets worth Rs 56,317.27 crore till December 2020, Credit Risk category lastly received a net inflow of Rs 366.44 crore in January 2021. The net outflows from the category have been displaying indicators of moderation more than the final couple of months, which at some point resulted in net inflow this month. This is an critical improvement as it shows that investors are steadily gaining their danger appetite back, which was severely impacted just after the debt crises in the course of the March-May period final year.
Compared to December, the quantity of folios decreased suggesting that there is a section of investor who chose to move away from this category. However, the fund mobilised shot up in the course of the month, whereas the redemption quantity fell, signifying that it is the current investors, who in all probability realize the danger return trade-off of the category far better, are the ones who are investing in the category. Although it will take a though for the category to make up for the assets it has lost more than the years, it is a excellent start off, nonetheless.
Another category which was severely hit in the course of the peak of liquidity crises final year was Medium Duration. However, post that, the net inflows into the category stabilized and continued to boost month just after month. In January, the category received a net inflow of Rs 1,841.75 crore, which was marginally larger than the net inflow of Rs 1,817.96 crore recorded in the earlier month.
“What has been pulling investors towards the funds from this category is their improved credit profile since the debt crises last year. Now most of the funds from the category have higher investments in AAA or equivalent rated securities. Moreover, the category is also positioned well in the current environment on the duration front, thus attractive investor interest,” informed Srivastava.