In March, a substantial sum of money amounting to Rs 1.98 trillion exited the "debt fund" domain, where investments are primarily directed towards bonds and similar instruments. However, April witnessed a remarkable turnaround as a massive inflow of Rs 1.90 trillion surged back into debt funds, almost replenishing the emptied coffers. Notably, this resurgence was particularly pronounced in "liquid funds," akin to easily accessible savings accounts within debt funds.
Liquid funds emerged as the frontrunner, witnessing the highest net inflows for the month, totaling Rs 1,02,751.50 crore, representing 54 per cent of the overall inflow. This surge was trailed by money market funds attracting Rs 34,084.11 crore and overnight funds experiencing a net inflow of Rs 21,195.42 crore. Nehal Meshram, Senior Analyst – Manager Research at Morningstar, elucidated this trend, attributing it to the customary phenomenon observed at the onset of the financial year. Following the settlement of tax obligations for the preceding financial year in March, corporates tend to deposit their surplus investible funds for short durations. Liquid funds and money market funds emerge as favored avenues for such deployments.
In the previous month, outflows were widespread across categories, with all but three experiencing net outflows. Investors displayed a preference for categories with shorter maturity profiles, such as ultra-short-term and low-duration funds, for temporary fund placements. Additionally, there was notable investor interest in the active duration strategy, resulting in significant inflows. Gilt funds notably garnered a net inflow of Rs 5,210.24 crore, marking its highest influx over a monthly period in the last five years.
Overall, April witnessed a substantial infusion of new capital amounting to Rs 2.39 trillion into mutual funds. While the majority found its way into debt funds, a portion was allocated to stock market funds (equity) and balanced funds (a blend of debt and stocks).
