Pressure on short-term yields pushes money out of short-term debt categories

RBI’s liquidity-normalising measures in the first and third week of January in the form of special reverse repo auctions exerted pressure on short-term yields, resulting in money being removed from open-ended short-term debt categories. Within that liquid funds bled the most with net outflows at ~Rs 45,316 crore, reversing December’s net inflow figure of Rs 5,102 crore. In January, low duration and money market schemes reported net outflows at ~Rs 8,041 crore and ~Rs 1,043 crore, respectively.

Long-duration maturity funds such as gilt, long-duration and medium-to-long duration funds also felt the pressure of outflows in the month, as investors removed money ahead of the budget and RBI’s monetary policy measures. The three categories at an aggregate level saw outflows of Rs 465 crore in the month.

Corporate bond funds, banking and PSU funds, and short-duration funds continued to attract investor interest in January; these funds received net inflows of Rs 5,429 crore, Rs 1,740 crore and Rs 6,893 crore, respectively.

Furthermore, credit risk funds recorded net inflows at ~Rs 366 crore in January, marking the first time the fund flow trend turned positive for the category since April 2019 (when AMFI changed its format of dissemination).

At an aggregate level, the asset base of open-ended debt funds fell ~Rs 31,926 crore on-month, or ~2.3%, to settle at Rs 13.74 lakh crore. December had seen the asset base of the category hit a record high of Rs 14.06 lakh crore.