Debt mutual fund flows turn negative at Rs 8,127 crore in August. What drove the outflows?

In August 2026, debt mutual fund flows turned negative, amounting to Rs 8,127 crore. This marked a stark contrast to the previous month's inflow of Rs 1.87 lakh crore in July. The major driver of these outflows was a sharp Rs 30,654 crore redemption from overnight funds, according to Umesh Sharma, CIO, Debt at The Wealth Company Mutual Fund.

Other categories saw outflows due to investor caution over inflationary risks, elevated energy prices, and evolving RBI policy expectations. Liquid funds experienced the highest inflow of Rs 19,934 crore, while money market funds received Rs 11,734 crore in inflows. Overnight funds saw the highest outflow of Rs 30,654 crore, followed by short duration funds with an outflow of Rs 4,256 crore.

Nitin Agrawal, CEO of Mutual Funds at InCred Money, noted that the mechanics of these flows are similar to previous months, with institutional cash cycling out of overnight funds and into Liquid funds. Overall, August's flows suggest that investors continued to favor liquidity and shorter-duration strategies, while remaining cautious about interest rates amid uncertainty.