Debt MFs continue to log outflow; see Rs 1 lakh crore withdrawal in September

Debt-oriented mutual fund schemes witnessed a net withdrawal of Rs 1.01 lakh crore in September, making it the second consecutive month of the outflow, primarily due to advance tax requirements of corporates and correction in equity markets.The segment saw an outflow of Rs 25,873 crore in August.

Before this, the debt schemes attracted Rs 61,440 crore in July, data from the Association of Mutual Funds in India (Amfi) showed. The huge outflow has pulled down the assets under management (AUM) of fixed income funds or debt funds to Rs 13.05 lakh crore at the end of September from Rs 14 lakh crore in the preceding month-end.

Investor sentiment towards debt investments was largely muted. Barring long duration and gilt fund segments, all the other 14 categories witnessed net outflows.

These two categories have been finding favour with investors for some time in anticipation of a change in the interest rate cycle.

"Advance tax payments and other quarter-ending accounting and financial necessities resulted in an outflow in the debt category in September," Gopal Kavalireddi, Vice President - Research at FYERS, said.

The huge net outflow in September could be attributed to the advance tax requirement that corporates need to meet with it being quarter end, Melvyn Santarita, Analyst - Manager Research at Morningstar India, said.

Moreover, some correction in the equity markets towards the later part of September could also have prompted investors to shift towards equity with the expectation of better returns, he added.

In terms of categories, expectedly liquid funds saw the highest net outflows of Rs 74,176 crore during the month, followed by money market funds (Rs 9,158 crore), ultra-short duration funds (Rs 5,168 crore) and floater funds (Rs 4,903 crore).

Further, corporate bond funds as a category witnessed net outflows of Rs 2,459 crore after witnessing regular net inflows since January.