Debt mutual fund inflows plunge 77% in May, but experts remain bullish
In May, total debt funds experienced a drop in net inflows, totaling ₹42,294.99 crore. This marks a decrease of 77.73% from April's figures, which stood at ₹1,89,890.52 crore.
Equity mutual funds have reported record high inflows in May, while debt funds have witnessed a substantial decline, according to recent data from the Association of Mutual Funds in India (AMFI).
In May, total debt funds experienced a drop in net inflows, totaling ₹42,294.99 crore. This marks a decrease of 77.73% from April's figures, which stood at ₹1,89,890.52 crore.
The decline in debt fund inflows can be attributed to several factors.
Himanshu Srivastava, Associate Director – Manager Research at Morningstar Investment Research India, highlighted a trend of diminishing flows into debt-oriented funds over recent years.
This trend is fueled by various factors, including changes in taxation and the robust performance of equity markets, leading investors to reallocate their assets towards equities.
Categories, including short duration, medium duration, dynamic bond, credit risk, gilt fund, and floater fund, have witnessed net outflows as investors are treading cautiously now.
Mohit Gang, CEO of Moneyfront, believes that tight liquidity in the banking system has also contributed to volatile flows in the cash segment.
He further believes that there is a lack of awareness among investors regarding the potential returns that debt instruments can offer.
Here's a look at returns of some of the medium to long duration mutual funds:
(Source: Moneycontrol)
"These are more particular in scenarios where the interest rate cycle is poised to reverse," Gang told CNBC-TV18.
Gang emphasised the importance of educating investors about the potential of debt investments to deliver robust returns under favorable market conditions.
Deepak Agrawal, CIO-Debt at Kotak Mahindra AMC suggests strategic investment approaches for investors.
With expectations of peaking interest rates domestically and globally, Agrawal advises investors with a one-year-plus horizon to consider long-duration funds, Gilts, dynamic, or three-year duration funds with higher allocations to corporate bonds.
ALSO READ | Over 27% of total net equity inflow for May came from this new fund offer: Should you invest now?
In May, total debt funds experienced a drop in net inflows, totaling ₹42,294.99 crore. This marks a decrease of 77.73% from April's figures, which stood at ₹1,89,890.52 crore.
The decline in debt fund inflows can be attributed to several factors.
Himanshu Srivastava, Associate Director – Manager Research at Morningstar Investment Research India, highlighted a trend of diminishing flows into debt-oriented funds over recent years.
This trend is fueled by various factors, including changes in taxation and the robust performance of equity markets, leading investors to reallocate their assets towards equities.
Categories, including short duration, medium duration, dynamic bond, credit risk, gilt fund, and floater fund, have witnessed net outflows as investors are treading cautiously now.
Mohit Gang, CEO of Moneyfront, believes that tight liquidity in the banking system has also contributed to volatile flows in the cash segment.
He expects spending to resume following the formation of the new government.
He further believes that there is a lack of awareness among investors regarding the potential returns that debt instruments can offer.
Here's a look at returns of some of the medium to long duration mutual funds:
| Scheme name | Crisil Rank | AuM (Cr) | YTM | 5Y | 10Y |
| Canara Robeco Income Fund - Direct Plan - Growth Plan | 4 | 122.15 | 7.2 | 6.74% | 7.76% |
| Kotak Bond Fund - Direct Plan - Growth | 3 | 1,903.40 | 7.55 | 7.54% | 7.94% |
| HDFC Income Fund - Direct Plan - Growth | 3 | 754.3 | 7.43 | 6.42% | 7.25% |
| Bandhan Bond Fund - Income Plan - Direct Plan - Growth | 2 | 491.25 | 7.48 | 6.45% | 7.84% |
| Nippon India Income Fund - Direct Plan - Growth | 5 | 324.28 | 7.34 | 7.31% | 8.20% |
| UTI Medium to Long Duration Fund - Direct Plan - Growth | 1 | 297.39 | 7.49 | 7.05% | 6.63% |
| Aditya Birla Sun Life Income Fund - Direct Plan - Growth | 3 | 1,848.85 | 7.51 | 7.33% | 8.07% |
(Source: Moneycontrol)
"These are more particular in scenarios where the interest rate cycle is poised to reverse," Gang told CNBC-TV18.
Gang emphasised the importance of educating investors about the potential of debt investments to deliver robust returns under favorable market conditions.
Deepak Agrawal, CIO-Debt at Kotak Mahindra AMC suggests strategic investment approaches for investors.
With expectations of peaking interest rates domestically and globally, Agrawal advises investors with a one-year-plus horizon to consider long-duration funds, Gilts, dynamic, or three-year duration funds with higher allocations to corporate bonds.
ALSO READ | Over 27% of total net equity inflow for May came from this new fund offer: Should you invest now?
(Edited by : Anshul)
First Published: Jun 12, 2024 12:04 PM IST
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