India’s mutual fund industry is making a decisive shift — and the message is clear: clarity on interest rates is still missing, so investors are parking capital where risk is lowest.
🔹 1. Ultra-short debt becomes the safe harbour
Despite inflation hitting record lows, markets are not pricing in an RBI rate cut ahead of the December 5 policy meeting.
→ Result: Investors are crowding into ultra-short, low-duration and money market funds.
📌 October inflows: ₹1.3 trillion — highest since April.
🔹 2. Why the short end?
• Short-end yields react faster to policy changes
• Global uncertainty tied to U.S. tariffs adds caution
• Long-duration bonds face more macro-driven volatility
As Mirae Asset notes, the shorter end is “responding more swiftly to monetary dynamics,” driving stronger inflows.
🔹 3. Government bonds face selling pressure
MFs have sold a net ₹72 billion in government bonds so far in November, after ₹158 billion of sales in Aug–Sep.
The long-end remains weighed down by:
• Uncertain timing of RBI cuts
• Global macro headwinds
• Portfolio derisking
🔹 4. What’s next?
RBI’s stance remains dovish, but timing of cuts is unclear.
Until visibility improves, capital will likely stay defensive — benefiting ultra-short and money market categories.
The big takeaway:
👉 In India’s fixed income landscape, duration is out, liquidity is in.