Debt mutual funds see over Rs 1 lakh crore outflows in June. Is the outflow trend likely to continue?

Debt mutual funds saw Rs 1.09 lakh crore in outflows in June, marking it the second consecutive month of withdrawals by investors. Here is the detailed breakup of monthly outflows and what experts say (Source: AMFI)

Among the 16 sub-categories, except for credit risk funds and floater funds, the other categories saw an outflow in the said time period.

Liquid funds saw the highest outflow of Rs 42,293 crore, followed by low duration funds, which saw an outflow of Rs 16,484 crore. Ultra short duration funds, money market funds and overnight funds saw outflows of over Rs 10,000 crore.

With virtually every major category led by liquid, overnight and money market funds registering redemptions. This pattern is characteristic of a quarter-end month, when corporates typically pull money out of liquid funds to meet advance tax obligations and other quarter-end commitments, said Varun Gupta, CEO, Groww Mutual Fund.
The scale of the outflow therefore reflects seasonal liquidity management rather than any meaningful shift in underlying sentiment, Gupta said.

Nitin Agrawal, CEO, Mutual Funds, InCred Money said the bulk of the redemptions came from liquid, overnight, and money market categories, instruments that move with corporate treasury cycles and tax payment schedules, not with investor sentiment and this is seasonal noise, not a structural retreat from fixed income.

Credit risk funds and floater funds received an inflow of Rs 247 crore and Rs 452 crore, respectively.

The AUM of debt mutual funds declined by 5% to Rs 17.37 lakh crore in June against Rs 18.25 lakh crore in the previous month.