The debt mutual funds have seen an outflow of Rs 7,979 crore in August against an inflow of Rs 1.06 lakh crore in July. In August 2024, debt mutual funds received an inflow of Rs 45,169 crore.
According to an analyst, this sharp reversal from robust inflows in July was primarily driven by significant redemptions in liquid funds and institutional investors have trimmed their allocations ahead of advance tax payments and quarter end liquidity needs.
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“Open-ended debt mutual funds witnessed net outflows of INR 7,980 crore in August 2025, a sharp reversal from the robust inflows of INR 1.07 lakh crore seen in July. The decline was primarily driven by significant redemptions in the liquid fund category, which saw a pullback after last month’s surge. Institutional investors trimmed allocations ahead of advance tax payments and quarter-end liquidity needs, underscoring the category’s sensitivity to short-term cash management cycles,” according to Nehal Meshram, Senior Analyst – Manager Research, Morningstar Investment Research India.
Among the 16 sub-categories, most of the categories saw outflows except for overnight funds, ultra short duration funds, low duration, money market, short duration, medium duration, and gilt fund with 10-year constant duration.
Overnight funds received the highest inflow of Rs 4,950 crore in August, followed by money market funds receiving an inflow of Rs 2,210 crore in the same time period. Medium-duration funds received the lowest positive inflow of Rs 111 crore in the mentioned period.
Liquid funds witnessed the highest outflow of Rs 13,350 crore in August, followed by gilt funds which saw an outflow of Rs 928 crore in the same period.
The expert adds that while liquid funds dragged overall flows into negative territory, other segments continued to attract investor interest.
Nehal said that the overnight funds witnessed inflows maintaining their appeal as a safe and instantly accessible investment option and the money market funds, which had recorded record inflows in July, saw moderated inflows, reflecting a natural slowdown after months of elevated additions.
In the current calendar year so far, debt funds have received a total inflow of Rs 2.19 lakh crore whereas in the current financial year, these funds have received an inflow of Rs 3 lakh crore.
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The expert believes that investor appetite for shorter-duration carry strategies remained robust, with categories offering stability, liquidity, and modest accrual continuing to find favor. “Short Duration, Low Duration, and Ultra Short Duration funds collectively attracted nearly Rs 1,416 crore, signaling a steady preference for low-volatility accrual strategies. In contrast, Corporate Bond Funds and Banking & PSU Funds faced combined outflows of approximately Rs 1,625 crore, as investors likely booked profits and shifted focus to more liquid, shorter-tenor options,” she added.
According to a monthly note by Association of Mutual Funds in India (AMFI), the AUM of open-ended debt funds declined marginally by 0.2% on-month to Rs 18.71 lakh crore in August from Rs 18.76 lakh crore in July, which can partly be attributed to outflows during the month.
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