With the Reserve Bank of India (RBI) raising repo rates twice in quick succession, the impact was evident on debt mutual funds— which witnessed a noticeable decline in May.
Collectively, debt funds saw a net outflow of ₹32,722 crore, as per the latest data released by AMFI (Association of Mutual Funds in India) for the previous month.
Although overnight funds and liquid saw an inflow, debt funds in other categories saw major declines.
Sample this. Ultra-short duration fund saw an outflow of ₹7,104 crore, low duration fund saw a redemption of ₹6,716 crore, money market fund fell by ₹14,598 crore in the month of May, short duration fund decreased by ₹8,603 crore and medium duration fund fell by ₹1,222 crore.
At the same time, long duration fund witnessed a redemption of a paltry ₹2.25 crore, dynamic bond fund saw a decrease of ₹2,414 crore and corporate bond fund fell by ₹2,146 crore.
The impact is seen as a direct impact of series of rate hikes by RBI and expectations of further rate hikes. Consequently, investors are not willing to lock their money in debt funds for a long tenure in the rising interest rate cycle. No wonder then the overnight and liquid debt funds bucked the trend and saw an inflow of ₹15,070 crore and ₹1,776 crore in the month of May.
In the month of April, debt-oriented schemes saw an outflow of ₹54,756 crore.
Redemption in close-ended funds
Close-ended schemes saw a total outflow of ₹10,573.66 crore in the month of May, as per the latest AMFI data.
Out of this, fixed-term plan saw an outflow of ₹10,039 crore and capital protection-oriented schemes witnessed an outflow of ₹534 crore.
Not only debt schemes, even equity-oriented close ended schemes also saw an outflow of ₹860.65 crore.
The ELSS schemes in the close-ended category saw an outflow of ₹20.35 crore whereas other equity schemes in this category saw an outflow of ₹840.30 crore, thus, taking the total redemption in close-ended schemes to a total of ₹11,434.20 crore.