Debt mutual funds have witnessed an outflow of Rs 25,692 crore in November compared to an inflow of Rs 1.59 lakh crore in the previous month. Market experts believe that this outflow was driven by large withdrawals from two most liquidity sensitive categories.

Nehal Meshram, Senior Analyst, Morningstar Investment Research India said that the decline was primarily driven by large withdrawals from the two most liquidity sensitive categories—overnight and liquid funds - as institutional investors withdrew surplus balances ahead of mid-quarter payment obligations and amid a tightening in system liquidity.

Among the 16-sub-categories, most sub-categories saw outflows in the said time period. Overnight funds saw the highest outflow of Rs 37,624 crore in November, followed by liquid funds, which saw an outflow of Rs 14,050 crore in the same period.

Umesh Sharma, CIO- Debt, The Wealth Company Mutual Fund is of the opinion that there is some rotation away from the very short end toward slightly longer carry-oriented categories. “The headline outflow is driven almost entirely by Overnight funds and in contrast, investors allocated meaningfully to higher-yielding but low-volatility segments such as money market, ultra short duration, and low duration funds,” Sharma added.