Debt MF outflows hit record Rs 2.9 lakh crore in March

ET Intelligence Group: The outflow from debt mutual fund schemes surged nearly 50% year-on-year to a record ₹2.95 lakh crore in March. While debt schemes typically show heavy redemptions in March as corporates withdraw funds to meet year-end obligations, the latest reading was the highest on record amid the need to build extra liquidity triggered by the West Asian crisis.

In addition, industry observers also cited a shift of funds to equity to take advantage of current weakness in the stock market. Liquid funds accounted for the largest share of outflows among debt schemes, with redemptions of ₹1.35 lakh crore in March, according to the data from the Association of Mutual Funds in India (AMFI).

“March has seasonal withdrawals from liquid funds. This time, banks, NBFCs and corporates are holding on to additional liquidity as a precaution amid geopolitical uncertainty due to the West Asia conflict,” Ravi Kumar Jha, MD & CEO, LIC Mutual Fund Asset Management told ET . He added that these institutions are waiting for greater clarity before redeploying this liquidity.

Among debt fund schemes, overnight funds recorded redemptions of ₹40,227 crore followed by money market funds with an outflow of ₹29,207 crore, and low-duration funds, which recorded an outflow of ₹25,227 crore.

Every year, institutional treasuries pull money out of liquid and overnight mutual funds in March to manage liquidity requirements during the fiscal year ending to meet financial obligations such as advance tax and Goods and Services Tax (GST) payments.To be sure, the outflow from debt funds in March have historically be-en of temporary nature as a sharp inflow is noticed in April since institutions tend to restore the proportion of their exposure to fixed assets. For instance, debt fund inflows surged to ₹2.19 lakh crore in April 2025 after an outflow of ₹2.03 lakh crore in the pre-vious month. Similarly, in April 2024, the inflow was ₹1.9 lakh crore following an outflow of ₹1.98 lakh crore in the prior month.For the full year FY26, debt mutual fund schemes recorded an inflow of ₹22,161 crore. Equity schemes attracted an inflow of ₹3.46 lakh crore during the year, while hybrid schemes reported an inflow of ₹1.55 lakh crore. Index funds garnered a net inflow of ₹25,932 crore over the fiscal year.

“Some investors may have shifted funds toward equities to take advantage of the sharp market correction in March, which made valuations more attractive,” said Himanshu Srivastava, principal-research at Morningstar Investment Research India. The BSE Sensex declined 11.5%, shedding 9,340 points in March amid the impact of the West Asia war.