The need of liquid funds in crisis

The need of liquid funds in crisis - The Content Park

For the quarter ended June 2020, investors invested Rs 1.24 lakh crore in various mutual fund types. Liquid and Arbitrage Funds are the biggest beneficiaries of this investment. Corona and related fund options have become an attraction for investors during the lockout period.

According to the Association of Mutual Funds of India (AMFI), investors have invested Rs 1.24 lakh crore in the first quarter of the current financial year, after withdrawing Rs 94,200 crore in the last quarter of the previous fiscal. The assets of 45 fund houses in the country grew by 14 per cent in the June quarter. During the fourth quarter of last fiscal, assets stood at Rs 25.50 lakh crore as against Rs 22.26 lakh crore.

In the last quarter, Rs 1.1 lakh crore was invested in securities, Rs 20,000 crore in arbitrage funds and Rs 11,000 crore in equity investing funds. In fixed income bonds, mainly institutional investors invest their easy cash amount in liquid funds. The highest investment of Rs 86,493 crore was in liquid funds during the quarter. In the previous quarter, Rs 94,180 crore was withdrawn from the same fund. This was followed by Banking and PSU Debt Fund with an investment of Rs 20,912 crore.

April-June was the biggest interest rate cut in the previous quarter. The RBI’s cut in interest rates to offset the Covid-19 results has boosted the returns of banking and PSU debt funds, which have high credit and invest in relatively safe bonds. Those who invested in low-credit, high-return credit risk funds realized the risk of this investment due to bond irregularities. As a result, funds flowed from credit risk funds to banking and PSU debt funds.

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