As pandemic intensifies, MF industry adds nearly 8 lakh debt folios

AMFI’s latest data shows a sharp rise in debt fund folios during the Covid-19 pandemic.

Between May and July 2020, the mutual fund industry has added 7.93 lakh new folios in debt schemes. During these three months, the MF industry has total 16.70 lakh folio to reach 9.21 crore.    

The MF industry added 1.5 lakh debt folios in May, 2.1 lakh in June and 4.2 lakh in July. However, the trend was different before May as the debt folio count fell consistently in January, February, March and April this year.  

Except overnight funds, all other debt fund categories have witnessed an increase in folios especially short term funds, corporate funds and Banking & PSU funds.  

While liquid funds have added 1.7 lakh folios between April and July, Banking and PSU funds saw an addition of over 1 lakh new folios, ultra short duration funds added 33,251 folios, low duration funds 58,545 folios and short term duration funds recorded growth of 93,158 folios over the last three months.

Overall, the total folio count in open ended debt schemes stood at 68.85 lakh as on July 2020.  

Experts believe that the rising interest in debt schemes is largely due to heightened volatility in equity markets and recent perform of debt funds.

Vishal Dhawan of Plan Ahead Wealth Advisors feels that investors are parking money in asset classes that they believe will overcome the current economic condition. “There are expectations that RBI would cut interest rates and debt funds are more likely to benefit from this situation,” said Vishal. 

Amit Bivalkar of Sapient Wealth, Pune points out that many investors have been chasing past returns. He said, “Many investors have started investing in debt funds because of attractive performance. However, they should not chase returns blindly to create wealth over long term.”