Liquid funds, which are used by corporates to park surplus cash, recorded the highest outflow of Rs 46,724 crore in May
After reporting Rs 1.4 lakh crore inflows in April, domestic mutual funds registered outflows worth Rs 50,000 crore as on May 31 on the back of outflows from liquid and income categories, according to the data on the Association of Mutual Funds in India.
Liquid funds, which are used by companies to park surplus cash, recorded the highest outflow of Rs 46,724 crore in May.
In the case of income funds, used by institutional and retail investors, there was an outflow of Rs 20,407 crore during the review period.
Outflows from these two categories also dragged down the industry AUM by almost Rs 66,000 crore to Rs 22.6 lakh crore at the end of May.
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The outflows have been unusual as companies mostly pull out from liquid schemes at the end of every quarter to pay quarterly advance taxes. But this time, it has happened in the middle of a quarter.
"There were expectations of CRR (Cash Reserve Ratio) hike in the last week's RBI policy, which would have tightened the liquidity. So companies pulled out assuming liquidity will become tight," said a fund manager from a foreign bank sponsored fund house.
Liquid funds invest in assets such as treasury bills, certificates of deposit and commercial paper for shorter horizon, while income funds invest in combination of government securities.
Gilt funds which invest in government securities also recorded outflows of Rs 428 crore.
“Companies keep moving in and out of liquid funds depending on their cash requirements. In income funds we believe a lot of retail money has moved out particularly from ultra-short term debt funds,” said Vidya Bala, head of mutual fund research at FundsIndia.
Opposite direction
Interestingly, equity funds and equity linked savings schemes together registered net inflows Rs 11, 350 crore despite volatile equity markets.
Mutual fund managers said that slew of investors continued their investments through SIPs or systematic investment plans.
“The good part is that investors are becoming matured and not pressing the redemption button when markets are volatile. We have observed none of our SIPs have been discontinued in the last one month,” said a fund manager from a private fund house.