According to Association of Mutual Funds in India (Amfi) data, the report pointed out that there was a net outflow of Rs 32,722 crore from debt equity funds (Debt Fund) in February and Rs 54,756 crore in March.
Also the Debt Fund category under review saw 14% net outflows in the last 2 months. And overnight this month, there have been huge withdrawals from segments like liquid and ultrashort-term duration funds.
RBI interest rate hike announcements, persistent inflation and stock market declines, commodity price hikes are the main reasons for investors to exit debt funds.
What is DEBT Fund?
Debt funds are the purchase of debt instruments in government and non-government institutions. That means the instrument can be treated as a loan to the issuer.
Debt instruments are debt funds that invest in fixed securities such as corporate bonds, government bonds, treasury bills, commercial paper and other money market instruments and thereby earn interest.
The primary reason investors invest in most debt funds is to get steady interest income and capital appreciation through it.
Debt instrument issuers pre-determine the interest rate and maturity period that you will receive. Hence, they are also known as ‘Fixed Income Bonds’.
Mutual fund advisors suggest that only investors who want a long-term investment should invest in these schemes and investors can ignore short-term volatility in debt funds.
Disclaimer: Mutual fund schemes are subject to market risks. Consult your advisor before investing and invest at your own discretion.