: Debt mutual funds continue to see outflow; investors withdraw Rs 70,000 crore in June qtr #IndiaNEWS #Business New Delhi: Investors continued to withdraw from mutual funds focused on investing in

Debt mutual funds continue to see outflow; investors withdraw Rs 70,000 crore in June qtr #IndiaNEWS #Business
New Delhi: Investors continued to withdraw from mutual funds focused on investing in fixed-income securities for third consecutive quarter and pulled out over Rs 70,000 crore in April-June due to high inflation and an increasing rate cycle.
In the next (September) quarter, it is safe to assume that monetary conditions will be tighter in terms of lower amount system liquidity and higher regulatory rates, both of which should see further reduction in mutual fund debt corpuses, Sandeep Bagla, CEO Trust Mutual Fund, said.
Interest rate will be the major factor to dictate flow in debt mutual funds in coming quarters. Once rates start stabilizing, inflows can be expected, Ankit Yadav, Wealth Manager (USA) & Director of Market Maestroo, said.
The latest outflow has pulled down the asset managed by fund managers for debt fixed-income funds by 5 per cent to Rs 12. 35 lakh crore at June-end from close to Rs 13 lakh crore at the end of March, data available with the Association of Mutual Funds in India (Amfi) showed.
After hitting a peak of Rs 14. 16 lakh crore in the first quarter of fiscal 2022, assets under management for the fixed-income category has been on a steady decline and since then the asset base has fallen by 13 per cent.
According to the data, net outflow from open ended fixed- income mutual funds or debt mutual funds was at Rs 70,213 crore in the quarter under review.
Month-wise, the quarter started on an optimistic note in April with the segment attracting Rs 54,756 crore, however, this changed in May and June, as the category saw net outflows of Rs 32,722 crore and Rs 92,247 crore, respectively.
This came following a net outflow of Rs 1. 18 lakh crore in March quarter and Rs 21,277 crore in quarter ended December 2021. Prior to that, the category had seen a capital infusion to the tune of Rs 10,858 crore in July-September 2021.
Trust MFs Bagla said investors have been withdrawing from fixed-income funds over the last three quarters primarily because of high inflation and its impact on interest rates. Higher interest rates result in lower bond prices which in turn eat into the returns of fixed-income investors.
According to him, investors have pulled out from fixed- income funds both due to liquidity requirements and in order to protect their capital.
The rising rates scenario, particularly from the US Federal Reserve, creates uncertainty in the mind of the investors, Yadav of Market Maestroo said.
As new debt fund becomes more attractive due to rates hikes, investors are redeeming their existing debt funds, he added.
Out of the 16 fixed-income or debt fund categories, 12 witnessed net outflows during the quarter under review.
Heavy withdrawal was seen from segments, such as low duration funds, short duration funds, corporate bond funds and banking and PSU funds.