Debt funds witness best month of FY25 as investors return to safety and yield
ADVERTISEMENT In contrast, the category had witnessed redemptions of Rs 15,908 crore in May and Rs 1,711 crore in June.
Open-ended debt mutual funds saw inflows of Rs 1.07 lakh crore in July, marking a sharp turnaround from June's muted activity, highlighted Nehal Meshram, Senior Analyst, Manager Research, Morningstar Investment Research.
Meshram attributed the rebound to robust allocations in institutional-heavy categories such as money market and liquid funds, supported by renewed participation in overnight funds.
Money market funds led the rally, attracting Rs 44,573 crore, its strongest monthly inflow in recent times — building on steady demand over the last few months. The category has now added nearly Rs 97,000 crore in the past quarter, cementing its position as a preferred parking avenue for surplus capital.
ADVERTISEMENT Liquid funds also recorded a solid comeback, with inflows of Rs 39,354 crore, while overnight funds garnered Rs 8,866 crore after two months of redemptions. Unlock 500+ Stock Recos on App The strong momentum in the liquid and money market segments was boosted by new fund launches, the JioBlackRock Liquid Fund raised Rs 8,917 crore, and the JioBlackRock Money Market Fund collected Rs 6,285 crore in July.
ADVERTISEMENT Short-duration strategies continued to attract investor interest. Ultra short duration funds received Rs 2,277 crore, while low duration funds garnered Rs 9,766 crore, reflecting steady appetite for low-risk, carry-oriented allocations.Ultra short duration funds are a category of debt mutual funds in India that invest in fixed-income instruments such as treasury bills, commercial papers, certificates of deposit, corporate bonds, and other money market instruments but with very short maturities.
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Corporate bond funds also saw net inflows of Rs 1,421 crore, supported by stable credit sentiment and attractive spreads. Gilt funds reversed June's outflows to post inflows of Rs 1,050 crore.However, not all segments benefited from the rebound. Banking & PSU funds recorded the steepest outflows in the fixed-income space at Rs 662 crore, Meshram noted.
ADVERTISEMENT Credit risk funds saw redemptions worth Rs 221 crore, pointing to ongoing caution toward lower-rated credits despite improving corporate balance sheets.Long duration funds faced withdrawals of Rs 416 crore, as uncertainty around the timing and scale of monetary easing discouraged duration-heavy bets.July's performance pushed year-to-date net inflows for fixed-income funds past Rs 2.28 lakh crore, making it one of the best months of FY25 for the segment.Meshram said the broad-based gains across money market, liquid, and corporate bond categories underscore sustained investor appetite for yield-carry opportunities, even as investors remain selective with longer-duration exposure.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
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