Debt funds witness outflows, gold ETFs lose sheen, reveals AMFI data

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Debt-oriented schemes continued to bleed for the second consecutive month in December, as total outflows from debt funds touched Rs 75,559.9 crores, significantly higher than Rs 4,706.7 crores, which flew out of debt funds in November, 2023. 

Liquid funds saw the highest outflows in this segment, to the tune of Rs 39,675.27 crores. However, as Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Research India Private Limited puts it, “The huge net outflow in December could be attributed to the advance tax requirement that corporates need to meet with it being the quarter end.”

Dynamic bond funds also witnessed net outflows, jumping marginally from Rs 134.08 crores in November, 2023 to Rs 136.34 crores last month. On the other hand, balanced advantage funds, which keep changing allocations between equity and debt assets depending upon the market conditions, saw significant inflows, inching up from Rs 589.97 crores in November to Rs 1,369.32 crores. 

As Srivastava noted, “Categories with less than one year of maturity witnessed net outflows. There continues to be uncertainty surrounding the interest rate scenario. While the broader consensus is that the increasing interest rate cycle has peaked, there is a lack of clarity over the timing of the possible reversion in the interest rate scenario.”

“Moreover, the robust performance of equity markets has been drawing increased attention from investors, resulting in them shifting from other asset classes towards equities”, he continued. 

The only schemes which witnessed inflows amidst the deb segment were short duration funds (Rs 595.20 crores), long duration funds (Rs 272.29 crores), corporate bond funds (Rs 188.46 crores) and gilt funds with 10-year constant duration (Rs 53.61 crores). 

Even inflows in gold ETFs dipped to Rs 88 crores in December 2023, down from Rs 333 crores in November, 2023. Notably, this was the lowest inflows had dipped over the last 6 months, 

As Melvyn Santarita, Analyst,  Morningstar Investment Research India Private Limited noted, gold has done fairly well over the last year but it dwarfs in comparison to how equities have fared. Given this backdrop, investors may have opted to book profits from gold and opt for a more risky approach with the anticipation of a reversal in rate cycle going ahead.

“With ongoing geo-political tensions, US inflation still higher than the desired number, the appeal of Gold as a safe haven and hedge against inflation is expected to continue”, he observed.