Debt mutual fund flows turn negative at Rs 8,127 crore in August. What drove the outflows?

Debt funds saw an outflow of Rs 8,127 crore in August compared to an inflow of Rs 1.87 lakh crore in July. In August 2025, the category saw an outflow of Rs 7,979 crore. Here is detailed breakdown of monthly inflows and outflows from debt mutual fund categories and what experts say (Source: AMFI)

Among 17-sub categories of debt mutual funds, six categories received inflows and others saw outflows.

Debt mutual funds recorded net outflows of Rs 8,127 crore in August 2026, primarily due to a sharp Rs 30,654 crore redemption from overnight funds, said Umesh Sharma- CIO, Debt, The Wealth Company Mutual Fund
Sharma added that other categories which saw outflows were majorly because of continued redemptions amid investor caution over inflationary risks, elevated energy prices, and evolving RBI policy expectations.

Liquid funds received the highest inflow of Rs 19,934 crore, followed by money market funds that received an inflow of Rs 11,734 crore. Overnight funds saw the highest outflow of Rs 30,654 crore in August, followed by short duration funds that saw an outflow of Rs 4,256 crore.

The mechanics are identical to prior months. Overnight funds saw outflows as institutional cash cycled out, while Liquid funds swung to a modest positive of Rs 19,934 crore. The institutional cash management categories dominate and distort the headline, said Nitin Agrawal, CEO, Mutual Funds, InCred Money.

Overall, August flows suggest that investors continued to favour liquidity and relatively shorter-duration strategies, while remaining selective toward categories carrying greater interest-rate sensitivity amid uncertainty over the direction of rates, said Himanshu Srivastava, Principal, Manager Research, Morningstar Investment Research India.

AMFI disclosed the data of debt oriented sectoral funds for the first time in August and the category received an inflow of Rs 583 crore.

Debt flows turned marginally negative at Rs 8,127 crore, even as liquid and money market funds continued to attract inflows, which partly offset outflows from overnight and longer duration categories

According to the monthly note by AMFI, Open-ended debt fund assets were nearly unchanged from July, with total AUM at Rs 19.33 lakh crore. Despite the net outflow and a hardening of long-term rates, debt fund AUM increased marginally.
This was primarily due to the easing of short-term rates, which boosted returns and attracted inflows into the ultra short term funds, money market funds and liquid funds categories, offsetting declines in longer-duration funds and the substantial outflow from overnight funds