Mata Securities India Pvt Ltd | SEBI Registered Research Analyst | Reg. No. INH000022668 | AMFI Registered MF Distributor | ARN-0158
₹1,96,613 crore came back into debt funds after quarter-end redemptions, led by Liquid Funds (+₹1,66,120 crore, +25.7%), Money Market Funds (+₹14,826 crore) and Overnight Funds (+₹9,138 crore)
₹1,88,969 crore went into paper maturing within three months, while universe modified duration fell to 0.99 years from 1.13 years
₹46,856 crore of CP and ₹19,623 crore of CDs were bought as money-market yields rose; the 3-month CD rate rose 50 bps to 6.80%
₹8,917 crore of paper maturing beyond one year was sold on a net basis, mostly beyond five years (₹8,825 crore), while the 1–3 year bucket saw marginal net buying of ₹1,105 crore
Money went to the short end, where yields rose most. The hike repriced T-Bills, CPs and CDs sharply, and managers used the post-quarter-end inflows to lock in those yields at low risk. Buying was concentrated in T-Bills and PSU CPs maturing between December and February, so this paper comes back to funds around the RBI’s December policy. Managers are earning carry while keeping the option to reinvest once the next policy signal is clear.
Managers sold the long end after the rate hike. The RBI’s move to “calibrated tightening” and a higher inflation print led managers to cut long-dated G-Sec holdings. The 10-year benchmark 6.94% GOI 2036 was the most actively traded security and was net sold, and selling in the 2065 and 2066 bonds was almost one-sided. Nine of the top ten net-traded long gilts were net sold. With near-term rate cuts ruled out, managers see little reason to hold duration and are likely to stay underweight the long end until inflation and crude oil settle.
Duration funds raised cash rather than deploy it. Cash in duration categories rose to 7.36% of AUM from 6.29%. The increase was largest in Dynamic Bond and Long Duration funds, the categories with the most room to take duration, and in Short Duration and Banking & PSU funds. Only Medium Duration and Medium to Long Duration funds put cash to work. Managers are holding cash for better entry points rather than buying duration into rising yields.
The overall stance is defensive and flexible. Managers sold long gilts, bought short paper and raised cash, so portfolios are positioned for higher-for-longer rates. Dynamic Bond and Long Duration funds now hold more cash, so these managers are likely to be the first to add duration once yields stabilise or the rate cycle shows signs of peaking.
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