KEEP IT FIXED

IN RECENT YEARS, FPIs HAVE MADE A BEELINE FOR DEBT FUNDS. WILL THE FUNDS CONTINUE TO OUTPERFORM ONCE THE CURRENT VOLATILITY EBBS?

- BY PRINCE TYAGI

THE RECENT CORRECTION in the Indian markets has led many mutual fund investors to take cover in safer, fixed-income instruments as they look to tide over the storm. This comes even as the sharp ups and downs in equity and debt markets have spooked foreign portfolio investors (FPIs), who have shifted between risk-on and risk-off sentiment.

Debt funds, which primarily invest in fixed-income securities like government and corporate bonds, offer investors stable returns with lower risk than investments in equity-oriented funds. Though not as popular as equity-oriented funds, they have seen a huge shift in flows in the financial year 2024-25 (FY25), compared with FY24.

Data from the Association of Mutual Funds in India (AMFI) shows that while debt funds saw net outflows of ₹23,097 crore in FY24, the trend has reversed so far in FY25 with an impressive net inflow of ₹3.41 lakh crore inflow till February 2025.

Apart from the correction and the shift to safer investment avenues, this has also been aided by the inclusion of the Indian government's bonds on the JP Morgan Emerging Markets Bond Index Global.

BETTER THAN EQUITY

The performances of Indian equity and debt mutual funds in the three months and one year to March 11 stand in stark contrast.