Liquid, Overnight Funds See Sharp Outflows in May–June Amid Seasonal Withdrawals

Liquid and overnight mutual funds witnessed over ₹81,000 crore in outflows across May and June as investors rebalanced their short-term portfolios. Meanwhile, money market funds gained traction.

Investors Pull Back from Liquid, Overnight Funds

Short-term mutual fund flows witnessed a sharp shift in recent months, with investors withdrawing over ₹81,000 crore from liquid and overnight funds in May and June 2025. According to data from the Association of Mutual Funds in India (AMFI), liquid funds saw outflows of ₹16,274 crore, while overnight funds experienced a far larger exodus of ₹65,401 crore during the same period.

This shift reflects a broader realignment of short-term capital deployment strategies, especially among institutional investors. Traditionally used to park surplus cash, these categories are now seeing reduced allocations, likely due to seasonal financial cycles, as per The Economic Times report.

Seasonal Trends and Corporate Withdrawals

Corporates and large institutions often deploy idle funds in liquid and overnight schemes early in the quarter. However, by the end of June, this capital is typically withdrawn to meet advance tax liabilities and complete quarter-end accounting formalities, the report added.

Money Market Funds See Strong Inflows

In contrast, money market mutual funds have been attracting considerable interest. Over the April–June quarter, they recorded the second-highest inflows among the 16 debt fund sub-categories. 

Read More: 7 Mutual Funds That Attracted Over ₹3,000 Crore in Inflows in June 2025.

Conclusion

The recent withdrawal from liquid and overnight funds underscores the fluid nature of short-term investment behaviour, particularly in the institutional segment. While seasonal outflows are expected, the growing popularity of money market funds signals evolving investor strategies in a dynamic interest rate environment.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.