Debt Mutual Funds See ₹1.02 Lakh Crore Outflow in September

Fixed-income mutual funds recorded a sharp reversal in September 2025, with net outflows of ₹1.02 lakh crore, compared to ₹7,980 crore in August, according to data from the Association of Mutual Funds in India (AMFI). 

The massive redemptions were primarily driven by institutional withdrawals from liquid and money market categories, reflecting typical quarter-end liquidity adjustments and advance tax-related outflows.

Key Development

Out of the 16 fixed-income categories tracked by AMFI, 12 witnessed net outflows in September. The liquid fund category saw the steepest withdrawals at ₹66,042 crore, followed by money market funds at ₹17,900 crore and ultra-short duration funds at ₹13,606 crore, while at the same time low-duration funds also saw net redemptions of ₹1,253 crore.

These large outflows reduced the total assets under management (AUM) of debt funds by nearly 5%, to ₹17.8 lakh crore at the end of September, from ₹18.71 lakh crore in August.

Investment Trends and Market Impact

Shorter-duration funds such as low-duration (₹1,253 crore) and short-duration funds (₹2,173 crore) saw smaller redemptions, indicating that investors continued to prefer accrual-oriented strategies amid tighter liquidity.

Conversely, overnight funds recorded a positive inflow of ₹4,279 crore, as investors parked funds temporarily for liquidity management. Modest inflows were also reported in dynamic bond (₹519 crore), medium-to-long duration (₹103 crore) and long duration (₹61 crore) categories.

Broader Market Context

While debt funds faced heavy redemptions, equity mutual funds attracted ₹30,421 crore in inflows during the same month: a 9% drop from ₹33,430 crore in August, as investors turned cautious amid global volatility and domestic market corrections.

Read More: SBI, HDFC and ICICI Mutual Funds Lead in B30 City Assets: AUM Analysis Reveals

Conclusion

The September outflows underline the cyclical nature of institutional investments in debt markets, driven by liquidity management and tax payments. Analysts expect debt inflows to rebound in October as liquidity stabilises and short-term yields normalise.

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