Debt-oriented mutual funds witnessed a strong recovery in October, driven by investments in liquid schemes and attracting a net inflow of ₹1.57 lakh crore after huge redemptions in the previous month.

Notably, 14 of 16 debt mutual fund categories reported net inflows during the month, while medium-duration and credit-risk funds maintained their trend of consistent outflows.

The positive inflow boosted the asset base of debt mutual funds by 11 per cent to ₹16.64 lakh crore in October-end from ₹14.97 lakh crore at the end of September, according to data with Association of Mutual Funds on India (AMFI).

As per the data, debt mutual funds attracted inflows of ₹1.57 lakh crore in October, marking a sharp reversal from the outflows of ₹1.14 lakh crore recorded in September.

Within the debt fund, liquid funds led the inflows with ₹83,863 crore, accounting for 53 per cent of the total, followed by overnight funds and money market funds with ₹25,784 crore and ₹25,303 crore, respectively.

"Corporates typically channel surplus funds into liquid and money market funds post-tax settlements in September, reflecting a preference for these low-risk, highly liquid options," Nehal Meshram, Senior Analyst, Manager Research, Morningstar Investment Research India, said.

Further, the ultra-short duration segment (less than 12 months) is experiencing good inflows compared to the medium- to longer-term segments. The segment has seen inflow of ₹7,054 crore.

Investors favoured funds with shorter maturity profiles for temporary placements, with low-duration funds, corporate bond funds, and short-duration funds attracting inflows of ₹5,600 crore, ₹4,644 crore, and ₹1,362 crore, respectively.

Additionally, after four consecutive months, banking and PSU funds have seen huge inflows to the tune of ₹936 crore.

In recent months, anticipation of a rate cut has fuelled interest in active duration strategies, with these funds positioned to benefit from potential interest rate declines.

In October, gilt funds experienced inflow of ₹1,375 crore, while long-duration bonds saw ₹1,117 crore. Inflows into these funds are expected to rise further once the rate easing cycle begins.

Apart from debt funds, investors pumped in a record ₹41,887 crore in equity-oriented mutual funds during the month under review against an investment of ₹34,419 crore.

Overall, the mutual fund industry witnessed an inflow of ₹2.4 lakh crore in the month under review, after an outflow of ₹71,114 crore in September. The huge inflow was due to investments into debt schemes.

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