MF: Why investors are getting disillusioned with debt mutual funds, withdrew ₹70,000 crore in June quarter

Mutual Fund: Investors continued to withdraw from mutual funds focused on fixed income securities for the third consecutive quarter. Investors pulled out over Rs 70,000 crore from mutual funds in the April-June quarter due to high inflation and rising policy rates.

According to Amfi, an association of mutual fund companies, assets managed by fund managers for debt fixed income funds declined by five per cent to Rs 12.35 lakh crore at the end of June, from about Rs 13 lakh crore at the end of March, due to the recent outflows. Was. The assets under management under the fixed income category hit an all-time high of Rs 14.16 lakh crore in the first quarter of FY 2021-22, but have been on a steady decline since then and have come down to 13 per cent by June 2022. .

According to data from the Association of Mutual Funds of India (Amfi), there was a net outflow of Rs 70,213 crore from debt mutual funds (open-ended fixed income mutual funds) in the quarter under review. An investment of Rs 54,756 crore came in this category in April but the situation changed in May and June and investors withdrew Rs 32,722 crore and Rs 92,247 crore respectively in these two months. The categories that get exposure include cash funds, 10-year gilt funds and long-term funds.

Sandeep Bagla, CEO, Trust Mutual Fund, said, “For the July-September quarter, it can be anticipated that monetary conditions will be tight in terms of systemic liquidity and higher regulatory rates. There may be an evacuation.” Bagla said that for the last three quarters, investors have been withdrawing money from fixed income funds mainly because of high inflation and its impact on interest rates. He said that investors are also withdrawing money for the need of liquidity and to protect their capital.

Ankit Yadav, Director and Asset Manager (US) at Market Maestro, said interest rate would be a key factor in deciding the inflows into debt mutual funds in the coming quarters. Flow can be expected once rates stabilize. Yadav said there is an atmosphere of uncertainty among investors amid fears of rate hike, especially by the US central bank.

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