Debt mutual funds receive inflows of Rs 1.59 crore in October. Are investors shifting back to safer assets?

Debt mutual funds received an inflow of Rs 1.59 lakh crore in October after witnessing an outflow for two consecutive months. Market experts say that the turnaround was largely driven by institutional investors who redeployed surplus cash after the quarter-end outflows observed in the previous month.

“Debt oriented funds witnessed a sharp recovery in October 2025, registering net inflows of INR 1.60 lakh crore. The turnaround was largely driven by robust inflows into liquid and overnight funds, as institutional investors redeployed surplus cash after the quarter-end outflows observed in the previous month,” said Nehal Meshram, Senior Analyst, Morningstar Investment Research India.

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Umesh Sharma, CIO- Debt, The Wealth Company Mutual Fund says that debt markets witnessed a sharp recovery after last month’s outflows, reflecting seasonal factors and a more balanced view on interest-rate expectations and investors are clearly not exiting risk; they are recalibrating their portfolios with greater nuance.

In October, debt mutual funds received an inflow of Rs 1.59 lakh crore against an outflow of Rs 1.01 lakh crore in September and Rs 7,979 crore in August. In October 2024, debt funds received an inflow of Rs 1.57 lakh crore.

“The growth in debt funds net inflows of nearly Rs 1.59 lakh crore was at the shorter end of the curve as over 96% of the inflows were in the overnight, liquid, ultra short duration, low duration and money market funds. These inflows followed historical trends and were expected as corporates and other institutions redeploy surplus funds after the quarter end, Sanjay Agarwal, Senior Director, CareEdge Ratings commented on the debt inflows

An analysis of AMFI data shows that total outflows over August and September amounted to Rs 1.09 crore. In comparison, during the same two-month period last year, outflows were recorded in only one month. Notably, in September 2024 alone, outflows touched Rs 1.13 lakh crore — almost the same as the combined outflows seen in August 2025 and September 2025.

“The Indian MF industry continued its progress towards reaching the US$1 trillion AUM mark, ending October 2025 with an AUM Rs 79.88 lakh crore, a growth of Rs 4.26 lakh crore over September 2025. This is a 10x jump over the Rs 0.43 lakh crore growth in the month of September 2025 (as compared to August 2025). However, about 68% of the net inflow of Rs 2.15 lakh crore this month is part of Overnight, Liquid, Ultra Short Duration and Money Market Funds. We expect some of this to exit closer to the Advance Tax payment due date,” said Naval Kagalwala, COO and Head of Products at Shriram Wealth.

Among the 16 debt sub-categories, most saw inflows, except long duration, dynamic bond, credit risk, gilt, gilt with 10-year constant maturity, and floater funds.

Liquid funds logged the highest inflow at Rs 89,375 crore in October, followed by overnight funds, which saw inflows of Rs 24,050 crore.

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“Liquid funds led the surge with inflows of INR 89,375 crore, reversing the September outflows of over INR 66,042 crore. Similarly, overnight funds attracted INR 24,051 crore, reflecting short-term treasury deployments as liquidity conditions eased post the tax outflows and quarter-end adjustments. Money market funds, too, rebounded strongly, garnering INR 17,916 crore, underscoring the return of institutional cash balances to short-term vehicles,” said Nehal.

The AMFI further showed that long duration funds saw the highest outflow of Rs 942 crore in the month of October. Gilt funds and floater funds saw an outflow of Rs 930 crore and Rs 262 crore respectively in the said time period. Gilt funds remained weak, registering outflows of INR 931 crore, as volatility in long-term yields persisted amid shifting global rate expectations, said Nehal.

According to a monthly note by AMFI, easing inflation concerns and steady liquidity supported demand for debt instruments through the month. Bond yields remained largely stable, with investors closely tracking fiscal developments, state debt supply and monetary policy signals from the Reserve Bank of India and the United States Federal Reserve.

The AUM for debt funds was recorded at Rs 19.51 lakh crore in October up from 17.79 lakh crore in September witnessing a surge of 10% on monthly basis.

“Debt AUM rebounded meaningfully to Rs 1.60 lakh crore, reflecting renewed confidence in short-duration and liquid strategies as rate expectations stabilise,” said Kartik Jain, MD & CEO, Shriram AMC.

Ankur Punj MD – Business Head Equirus Wealth said that, “We are seeing declining inflows to Equity funds since August, this is driven by multiple factors like profit booking, cautious investor sentiment due to global policy uncertainties and tariff overhang. Investors are looking at safer options like debt and hybrid funds.”