Debt mutual funds witnessed an outflow of over Rs 6,800 crore by investors in August as the yields hardened due to concerns over rupee’s weakness and rising oil prices and their impact on inflation and current account deficit (CAD).

According to the Association of Mutual Funds in India (AMFI) update, these funds saw inflows to the tune of Rs 9,810 crore in August last year.

“Debt mutual funds continued to experience outflows in August 2018 as yields hardened due to concerns on weakness in the domestic currency and rising oil prices and their impact on inflation and CAD,” Bajaj Capital CEO Rahul Parikh said.

As per the data, debt mutual funds saw redemptions of Rs 6,803 crore by investors last month compared to an outflow of Rs 7,000 crore in July. Debt funds have seen net outflows in 4 out of 5 months in this fiscal so far. With this, the total outflow has reached a little over Rs 52,700 crore so far in the current financial year (April-August).

Going ahead, Parikh said debt funds may continue to see outflows pending any RBI action in the currency and/or bond markets.

“Markets anticipate open market operations (OMOs) from RBI, which may provide some relief to yields and hence may lead to a reversal of outflows from debt mutual funds,” he added.

Under OMOs, RBI buys certain government securities from the market, thereby providing liquidity to the system. Overall, total redemptions from mutual fund schemes stood at Rs 1.75 lakh crore last month. This included Rs 1.71 lakh crore from liquid funds, which invest in cash assets such as Treasury bills, certificates of deposit and commercial paper for shorter horizon.

On the other hand, equity schemes attracted over Rs 7,700 crore. At present, debt fund investment by retail investors constitute just 10 per cent, while the rest is equity.

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