Corporate bond and banking & PSU funds, which were once among the favourites of retail investors in the debt space, witnessed net outflows for the sixth-straight month in February.
Since September, the two fund categories have recorded net outflows of Rs. 22,000 crore each. As a result, the AUM of corporate bond funds has declined from Rs. 1.62 lakh crore in September 2021 to Rs. 1.47 lakh crore in February 2022. Similarly, the AUM of banking & PSU funds has decreased from Rs. 1.2 lakh crore to Rs. 1 lakh crore during the same period.
Monthly net inflows in the last six months:
|
Month |
Corporate Bond Fund |
Banking & PSU Fund |
|
September |
-1,434 |
-4,404 |
|
October |
-875 |
-1,252 |
|
November |
-4,593 |
-4,193 |
|
December |
-4,306 |
-6,217 |
|
January |
-936 |
-2,537 |
|
February |
-10,219 |
-3,654 |
|
Total |
-22,363 |
-22,258 |
*All numbers are in Rs crore
AMFI CEO NS Venkatesh said that investors are redeeming money from the two schemes due to heightened interest rate risks. "Investors are booking profit in debt funds due to interest rate risks. A portion of the money is flowing into liquid and other shorter duration funds," he said while addressing the media earlier this month.
Experts believes that debt funds are facing interest rate risks as most countries, including India, are about to raise interest rates due to high inflation. Bonds have inverse relationship with interest rates. When interest rates go up, bond prices usually fall. As debt funds invest in bond, they too see a decline in returns.
The fall in investor interest is also due to poor performance of debt schemes in the last one year or so. In fact, most scheme categories even failed to beat inflation. The one-year return of corporate and banking & PSU funds is also on the lower side. They have delivered 4.5% return to investors in the last one year, shows data from Value Research.
