● When the economic slowdown is in the high range the investors are considering secure tools thus they invested in debt funds as result it skips to 46% in May.
● The RBI had announced a Rs 50,000 crores special liquidity facility to boost the confidence of MFs.
In the last 15-20 days of the news flow, we understand that the Covid19 infections have continued to be at a very high level. Though, some enhancing data points indicate a slowdown in the number of deceleration for banks and even some corporates which we have interacted with seem to be better than what the market has expected as it seems the debt mutual fund's influx by 46% to Rs.63,665 crores in May.
The most individual categories which invest in fixed income securities or debt funds saw a reduction of capital.
Nevertheless, credit risk, medium duration, overnight and dynamic bond funds saw retractions.
The fixed income securities of MFs investment saw a growth of Rs.63,665 crores last month as compared to an accumulation of Rs.43,431 crores in April according to the Association of Mutual Funds in India (Amfi).
In January, this segment vouched for a massive inflow of Rs. 1.09 lakh crore, Rs.28,000 crores in February, and outflow of Rs.1.95 lakh crore in March.
We witnessed a total of inflow last month. Liquid funds that invest in cash assets such as treasury bills, certificates of a deposit, and commercial paper for a shorter horizon stimulated a staggering investment of Rs 61,870 crores.
The co-founder and COO of Groww Harsh Jain quoted “RBI's course of action to deal with the inconvenience in few debt funds have manifested clear success in instilling confidence in investors as investments in debt funds in May are back on track to levels similar as before.”
Previous April, The Reserve Bank Of India had announced a Rs 50,000 crore special liquidity facility for mutual funds to ease, liquidity pressure in the sector.
According to (Amfi) CEO NS Venkatesh, the investors are taking advantage of valuable interest rates trends. Moreover, the shift towards high-quality AAA-rated developed in a steady rise in net flows of debt schemes.
The overnight funds, which invest in cash assets that are treasury bills, certificates of deposit, and commercial paper for a shorter horizon were removed from Rs15,880 crores.
NS Venkatesh also said that “credit risk concerns have ebbed, following regulatory support, redemptions have reduced, and we should look for investors allocating a higher quantum of savings to high-quality debt paper.”
On the other hand, we have seen that investors inflated Rs 5,256 crores in equity mutual funds. And this comes amid the broader market witnessed substantial volatility on concerns over the impact of a pandemic.
Fundamentally, we can conclude, the mutual fund industry witnessed a net inflow of over Rs 70,800 crores across all segments in May.
-Priya Dutta Banik