Debt mutual fund sees Rs 32,722-cr outflow in May on rising interest rates

This comes following an inflow to the tune of Rs 54,656 crore in April, data from the Association of Mutual Funds in India (Amfi) showed.

New Delhi: Mutual funds focused on investing in fixed-income securities witnessed a net outflow of Rs 32,722 crore in May in the wake of Reserve Bank of India (RBI) stance on monetary policy turning hawkish to tackle inflation driven by global factors.

This comes following an inflow to the tune of Rs 54,656 crore in April, data from the Association of Mutual Funds in India (Amfi) showed.

In addition, there has been a reduction in the number of folios from 73.43 lakh to 72.87 lakh folios between April and May 2022.

Debt funds have always been considered as a safer investment option, especially during volatile markets. However, rising interest rates, a volatile macro environment and higher yields have likely impacted investors' investing preferences within debt markets.

Kavita Krishnan, Senior Analyst - Manager Research, Morningstar India, said that rising food, commodity and fuel prices, among other macro factors like the war in Ukraine likely led to the rate hike of 40 basis points (bps) in May 2022. Moreover, RBI's focus on curbing inflation led to expectations of further rate hikes going forward.