Nearly Rs 81,000 crore pulled from liquid, overnight MFs. Time for a portfolio check?
Tired of too many ads?
Remove Ads
Tired of too many ads?
Remove Ads
Tired of too many ads?
Remove Ads
Mutual fund investors have realigned their short-term investments, pulling money out of liquid and overnight funds amid changing preferences. These two categories together witnessed an outflow of more than Rs 81,000 crore in May and June.According to monthly data released by the Association of Mutual Funds in India (AMFI), liquid funds saw an outflow of Rs 16,274 crore, while overnight funds recorded an outflow of Rs 65,401 crore over the last two months.Also Read | Investors pump over Rs 30,000 crore in flexi-cap mutual funds in H1 CY2025. Is all-cap exposure a new favourite? On the contrary, money market funds have been receiving significant inflows. According to the data, money market funds recorded the second-highest inflows over the last three months—April, May, and June—among the 16 sub-categories within debt mutual funds.Market experts believe this reversal is primarily driven by seasonal factors, as many corporates and institutions use these categories to park short-term surplus funds. However, by June, this money tends to flow out due to advance tax payments and quarter-end balance sheet adjustments.'Additionally, with a series of interest rate cuts, yields in short-duration categories like overnight and liquid funds have flattened. As a result, investors have begun reallocating capital toward slightly higher-duration categories such as money market and ultra-short duration funds, which offer better accrual potential in the current interest rate environment,' Arjun Guha Thakurta, Executive Director, Anand Rathi Wealth Limited, told ETMutualFunds.'In the past two months, we've also seen a reversal in equity markets, which may have further triggered outflows from retail investors as part of portfolio reallocation,' he added.In April, money market funds received inflows of Rs 31,507 crore, followed by Rs 11,223 crore in May, and Rs 9,484 crore in June.Investors generally consider overnight and liquid funds as options for parking idle savings outside the banking system. For a savings account alternative, safety and liquidity must take priority—and liquid and overnight funds come closest to meeting these criteria.Given this context, the key question is: should one review their emergency fund parked in liquid or overnight funds? Addressing this, Thakurta advises that investors need not worry about recent outflows, as they are largely driven by institutional activity and seasonal factors—not by any structural concerns. Liquid and overnight funds invest in highly liquid instruments such as treasury bills, call money, and other short-term government-backed securities, which carry zero credit risk and offer fixed, predictable returns.Also Read | Nearly 112 lakh SIPs closed in 2025: Should you worry about the negative net SIP trend? Commenting on better alternatives to park short-term surplus money right now, the expert said it's about being selective. 'If your investment horizon is up to 1–6 months, ultra short-term duration funds are ideal. For a horizon of 6 months to 1 year, arbitrage funds work well, as they offer better potential without a significant increase in volatility,' Thakurta recommends.Looking at the monthly returns, liquid funds delivered an average absolute return of 0.53% in May and 0.49% in June. Overnight funds gave average returns of 0.46% in May and 0.41% in June.In comparison, money market funds posted higher average returns—0.66% in May and 0.61% in June.In the case of liquid and overnight funds, if an investor redeems money on a Friday, they receive the amount on Monday, but the net asset value (NAV) applicable will be that of Sunday. This is because NAVs for these funds are declared for every day, including weekends and holidays.With continued outflows from these two categories, some investors are concerned about the potential impact on returns or liquidity. Addressing this, Thakurta said returns might remain slightly muted in the near term—especially for overnight and liquid funds—due to the series of interest rate cuts. However, there are no liquidity concerns.'Liquid and overnight funds can comfortably handle large inflows and outflows as they invest in highly liquid instruments like treasury bills and call money. Even with recent outflows, these funds remain robust and well-positioned to meet redemptions without stress,' he added.In May, corporate bond funds received the highest inflows among the 16 sub-categories, amounting to Rs 11,983 crore. In June, short-duration funds topped the chart with inflows of Rs 10,276 crore.As these categories gain traction and receive the highest inflows, the question arises: are corporate bond and short-duration funds more suitable in the current environment compared to liquid and overnight funds?Also Read | Mutual funds slashes cash allocation by Rs 13,000 crore in June; PPFAS and Quant MF join trend The expert said it depends on the investment horizon. If you're looking to park funds for up to 6 months, ultra-short-term duration funds are ideal. However, if your time frame is beyond 6 months, arbitrage funds can be a wise choice, as they offer tax advantages along with better return potential and low volatility.According to SEBI's mandate, overnight funds invest in overnight securities with a maturity of one day, while liquid funds invest in debt and money market securities with a maturity of up to 91 days. In contrast, money market funds invest in money market instruments with a maturity of up to one year.One should always invest based on their risk appetite, investment horizon, and financial goals.(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)If you have any mutual fund queries, message ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@timesinternet.in along with your age, risk profile, and Twitter handle.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Economic Times
20 minutes ago
- Economic Times
In 2019, Rs 50K was gold and now it can't pay rent: CA explains why most are struggling, not 'surviving' in urban cities
Synopsis Chartered Accountant Nitin Kaushik has warned that in 2025, earning less than Rs 50,000 a month in metros like Bengaluru, Mumbai, or Pune means barely covering basic expenses. He says rent alone swallows 40-60% of income, with essentials and lifestyle costs doubling in three years. Bengaluru's prime-area rents have surged up to 100% since 2022. Kaushik estimates singles need Rs 20-30 lakh annually for comfort, families Rs 40-50 lakh. Even Rs 1 lakh earners struggle, prompting his call for upskilling, smart budgeting, and early investment. TIL Creatives Representative AI Image Living in India's largest cities has become a battle to stay afloat. Chartered Accountant Nitin Kaushik says that in 2025, a monthly income below Rs 50,000 in Bengaluru, Mumbai, or Pune means 'barely breaking even' rather than on X, he warned that rents alone consume 40-60% of many urban salaries. Add transport, food, and utilities, and there is little left over. 'Living in a metro today without a strong salary equals financial pressure 24x7,' Kaushik wrote. — Finance_Bareek (@Finance_Bareek) Bengaluru, long considered India's tech capital, has seen one of the sharpest rent hikes. Kaushik pointed out that in prime neighbourhoods, one-bedroom flats that cost around Rs 18,000 a month in early 2022 now exceed Rs 30,000. That is an increase of 70-100%.He linked the rise to several factors — the return to office after COVID, a wave of job relocations, and growing real estate demand from NRIs and investors. Kaushik also highlighted that the price of essentials such as food, energy, and transport has stayed high. Combined with lifestyle spending, this has made metro living nearly twice as expensive as it was just three years ago. For those hoping to live comfortably, Kaushik estimates that in 2025, a single person in Bengaluru would need a CTC of Rs 20-30 lakh a year. For a family with one child, that figure rises to Rs 40-50 lakh, which he says would cover good housing, schooling, leisure, and savings. Kaushik warned that even households earning Rs 1 lakh a month are often stuck living paycheck to paycheck due to lifestyle expenses. His advice is direct: upskill to increase income, manage rent and commuting costs, start investing early, and look beyond headline salaries to focus on take-home pay after adjusting for living summed up the shift bluntly: 'Your Rs 50K/month in 2019 was gold. In 2025, it barely pays rent.'
Economic Times
20 minutes ago
- Economic Times
Supreme Court reserves verdict on JSW Steel's Rs 19,700 crore resolution plan for Bhushan Power
Synopsis The Supreme Court has reserved its verdict on JSW Steel's resolution plan for Bhushan Power and Steel. Key issues include the allocation of earnings generated during the resolution period and JSW's compliance with the plan. Former promoters challenged JSW's actions, while the creditors seek additional funds. The Solicitor General criticized the former promoters, alleging significant financial misconduct. iStock The Supreme Court on Monday reserved its verdict on a batch of pleas related to JSW Steel's Rs 19,700-crore resolution plan for debt-ridden Bhushan Power and Steel Limited (BPSL). A special bench comprising Chief Justice B R Gavai and Justices Satish Chandra Sharma and K Vinod Chandran heard arguments from Solicitor General Tushar Mehta for the committee of creditors (CoC), senior advocate Neeraj Kishan Kaul for JSW Steel, and senior advocate Dhruv Mehta for the former promoters before reserving the verdict. As many as five pleas were heard afresh after the CJI-led bench, on July 31, recalled its May 2 verdict that had directed liquidation of BPSL and set aside JSW's resolution plan, criticising the conduct of the CoC, the resolution professional, and the National Company Law Tribunal (NCLT) for what it termed a "flagrant violation" of the Insolvency and Bankruptcy Code (IBC). One of the key issues was whether earnings before interest, tax, depreciation, and amortisation (EBITDA) generated during the resolution period should go to the creditors or remain with the company. The CoC is seeking Rs 3,569 crore in EBITDA and Rs 2,500 crore in delay-related interest. Kaul, representing JSW, the successful resolution applicant, said neither the request for resolution plan (RFRP) nor the resolution plan itself mandated sharing EBITDA with creditors. He said JSW bid for BPSL on an "as is, where is" basis, accepting both its losses and profits, and that the delay in plan implementation was due to the ED's asset attachment, which was lifted only in December 2024. Dhruv Mehta, appearing for the former promoters, challenged JSW's compliance with the resolution plan and defended their right to participate in the proceedings, citing their role as personal guarantors. He alleged that JSW failed to inject the promised working capital and accused the company of benefitting from rising steel prices before implementing the plan. He also contended that the CoC's powers do not extend beyond plan approval by the NCLT and that disputes over non-compliance should be taken back to the tribunal. The solicitor general Mehta described the former promoters as having "brought the company to dust" and called this "one of the worst cases of siphoning" he had seen. He maintained that the CoC's claims over EBITDA and delay interest were justified and that the body remained a legal entity until the Supreme Court's final decision under Section 62 of the IBC. Earlier on August 8, the COC had opposed the plea by former promoters by questioning the maintainability. A bench headed by former top court judge Bela M Trivedi on May 2 ordered liquidation of BPSL while setting aside a resolution plan of JSW Steel Limited for the ailing firm. PTI
India Today
32 minutes ago
- India Today
India's R&D deficit: Just where are the scientists?
(NOTE: This article was originally published in the India Today issue dated August 18, 2025)Nobel laureates and physicists Duncan Haldane and David Gross have just pointed out a huge mismatch: India has the talent, but is not benefitting because there's not enough funds for scientific research. Speaking at the Quantum India Summit in Bengaluru on July 31, Gross, who chairs an advisory board at the International Centre for Theoretical Sciences here, says India's lack of investment in R&D doesn't bode GDP is up, but its contribution to 'investments to the future', which will drive new technologies and industries, is low. In 2009, India's R&D spend was 0.84 per cent of GDP; it fell to 0.64 per cent by 2021 and is estimated to be 0.7 per cent in 2025. This is much less than what the US (3.5 per cent) and China (2.4 per cent) Rs 1 lakh crore Research Development and Innovation (RDI) fund, announced in this year's budget, should help. It will be operationalised this year, with Rs 20,000 crore already allocated. The Anusandhan National Research Foundation, launched last year, also has a fund, but will primarily invest in academic research and research labs. The RDI fund is meant for private sector R&D, with its Deep Tech Fund 1.0 focusing on strategic autonomy in critical sectors like clean energy and advanced materials. Last year, India was ranked 39th in the Global Innovation Index of 133 countries, up one spot from 2023. The number of full-time equivalent (FTE) researchers per million people in India is 255, abysmal when compared to the USA (4,452), China (1,307), Korea (7,980), and far below the global average of 1,198. The trend of fewer FTE researchers and minimal spends points to an underlying crisis in the R&D sector. As one researcher at the summit put it: 'Cutting-edge research is so fast; if we lose the first few years [due to cost-cutting], we are behind our colleagues abroad already.'Subscribe to India Today Magazine- EndsMust Watch
