Debt mutual funds attracted Rs 1.87 lakh crore in July after two months of outflows. Is the trend set to continue?

Debt mutual funds in July 2026 attracted Rs 1.87 lakh crore after reversing outflows seen in the previous two months, which totalled Rs 2.06 lakh crore. In July 2025, the category had received an inflow of Rs 1.06 lakh crore, according to the monthly data disclosed by Association of Mutual Funds in India (AMFI). Here is what the data shows and experts say.

This follows the seasonal pattern of June quarter-end outflows being reversed in July and is therefore more reflective of a normalisation of quarter-end treasury movements than a structural shift toward debt funds, said Sanjay Agarwal, Senior Director, CareEdge Ratings.

Among the 16 sub-categories, seven recorded inflows and nine sub-categories saw outflow in the said time period.

Liquid funds received the highest inflow at Rs 1.19 lakh crore, followed by overnight funds and money market funds, which received inflows of Rs 40,412 crore and Rs 21,180 crore, respectively.

Varun Gupta, CEO, Groww Mutual Fund said The sharp reversal in debt flows was the most notable feature of the month, led by strong flows into liquid, overnight and money market funds, even as longer-duration categories remained under pressure. This suggests that investors continue to value liquidity and flexibility in the debt portfolio, rather than making a broad-based shift towards taking duration risk.

Corporate bond funds recorded the highest outflow at Rs 784 crore, followed by long-duration funds, which saw an outflow of Rs 618 crore during the month.

Corporate bond, banking & PSU and longer duration-oriented funds continued to see modest outflows, indicating a preference for short-term and liquidity products and investor caution on taking long-term bets, said Agarwal.

“Debt-oriented mutual fund schemes witnessed a sharp reversal in July 2026 following the sizeable quarter-end redemption cycle in June. The short end of the yield curve saw a return of institutional liquidity, with ultra-short duration, low-duration, money market and short-duration funds recording net inflows, reflecting the largely seasonal nature of the June outflows,” said Umesh Sharma, CIO - Debt, The Wealth Company Mutual Fund.
“Duration-oriented categories continued to witness redemptions, albeit at a significantly lower pace, as markets reassessed the impact of higher energy prices, monsoon-related inflation risks and evolving liquidity conditions following recent RBI measures,” Sharma further said.

The AUM of debt mutual funds surged by 11% to Rs 19.33 lakh crore in July against Rs 17.37 lakh crore in the previous month.