2 days ago
Corporate bond mutual funds attract most inflows in over two years
Corporate bond mutual funds received the highest inflows in over two years as aggressive cash injections by the Reserve Bank of India spurred investments by the nation's lenders.
These funds attracted a net inflow of Rs 11,983 crore in May, the highest since March 2023, according to monthly data released by the Association of Mutual Funds in India. This marks the second straight month of inflows into funds that invest mainly in company debt rated AA+ and above as these funds received an inflow of Rs 3,458 crore in April.
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'This inflow could be largely from banks, which may be parking their excess liquidity,' said Dhawal Dalal, chief investment officer for fixed income at Edelweiss Asset Management. 'It may be a tactical call they may have taken and may remain invested for sometime. There is surplus liquidity available.'
Among the 16 sub-categories in debt mutual funds, the corporate bond funds received the highest inflows and on monthly basis witnessed a surge of nearly 246%.
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'Corporate Bond Funds stood out with inflows of INR 11,983 crore, possibly driven by attractive yields and the relatively stable credit outlook,' said Nehal Meshram, Senior Analyst – Manager Research, Morningstar Investment Research India
Company bonds have emerged as one of the favored trades due to their attractive yields over government debt and shorter tenors. Their appeal intensified after the Reserve Bank of India's unexpected liquidity injection to support growth. The authority also shifted its stance to neutral, tempering expectations for further easing, making longer-duration debt less appealing, as reported by Bloomberg.
'The inflows might continue but we see it more in shorter end than into longer duration bonds,' said Venkat N Chalasani, chief executive officer of AMFI.
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Debt mutual funds saw an outflow of Rs 15,908 crore in May against an inflow of Rs 2.19 lakh crore in April. Money market funds received an inflow of Rs 11, 223 crore.
Liquid funds reported the highest outflow of Rs 40,205 crore in May against an inflow of Rs 1.18 lakh crore in April. Overnight funds saw an outflow of Rs 8,120 crore, followed by floater funds witnessing an outflow of Rs 254 crore in the same period.
Credit risk funds and medium duration funds reported an outflow of Rs 247 crore and Rs 47 crore respectively.
