₹1.32L crore outflow in December: What happened to debt funds?
What's the story
Debt-oriented mutual fund schemes witnessed a massive net outflow of ₹1.32 lakh crore in December, as per data from the Association of Mutual Funds in India (AMFI). This is a sharp increase from the November outflows of ₹25,693 crore. The trend was mainly driven by liquid, money market and ultra-short duration funds during the month due to year-end cash requirements of corporates and institutional investors.
Market analysis
December outflows reflect year-end treasury activity
Himanshu Srivastava, Principal Research at Morningstar Investment Research India, explained that the net outflows in debt-oriented mutual fund categories were much higher than last month due to pronounced year-end treasury activity and evolving interest-rate expectations. He added that corporates and institutions withdrew surplus cash for advance tax payments, balance-sheet adjustments and working-capital needs. These seasonal outflows are typical in the December quarter and do not indicate any structural weakness in debt fund demand.
Fund performance
Most debt fund categories saw net outflows
AMFI data showed that all debt fund categories, except overnight and floater funds, witnessed net outflows in December. Medium- to long-duration funds, dynamic bond funds, gilt funds and long-duration categories continued to see redemptions. This indicates caution among investors in taking active duration positions. Corporate bond funds and banking & PSU funds also saw net outflows due to institutional profit-taking and portfolio rebalancing rather than credit-related concerns.
Investor behavior
Floater funds witness net inflows in December
Despite the overall trend, floater funds witnessed net inflows in December. This was likely due to investors looking for lower duration risk and relatively stable yields amid uncertainty over the timing and pace of further rate cuts. The data indicates a shift in investor behavior toward these specific fund categories during this period.