Investors rush to exit risky funds in April

MUMBAI: Investors in credit risk funds ran for exits, redeeming units worth ₹19,238.98 crore in April, after six of Franklin Templeton India’s funds in the category collapsed.

In comparison, investors sold only ₹6,279.23 crore worth of units in March, a month that typically sees the highest redemptions as companies sell investments in debt and liquid funds at the end of the financial year.

Still, investors poured into other debt mutual fund categories in April as interest rates are expected to decline further, driving up the industry’s overall assets under management.

Debt funds, which saw an outflow of ₹1.94 lakh crore in March, received overall inflows of ₹43,431.55 crore, primarily into liquid schemes, corporate bond funds, banking and PSU funds, overnight funds and gilt funds in April, the Association of Mutual Funds in India (Amfi) said on Friday.

“In the prevailing scenario of low inflation, expected softer interest rate regime, the mutual fund industry would see heightened interest in fixed-income schemes,” NS Venkatesh, chief executive, Amfi, said.

Other debt fund categories that saw outflows, include medium duration funds (₹6,363.53 crore), short duration funds (₹2,309.05 crore), money market funds (₹1,210.35 crore), low duration funds (₹6,841.07 crore) and ultra-short duration funds (₹3,419.32 crore).

Debt fund redemptions slowed after the Reserve Bank of India (RBI) announced a ₹50,000 crore credit support for mutual funds, said Venkatesh. “Stability in redemptions indicate that investors’ confidence is returning to these schemes,” he said.