Mumbai: Intensifying worries over credit risks in India is driving a gush of cash into securities maturing overnight.
Net inflows to overnight funds soared to Rs 23.5 billion in May, up from Rs 957 million in April, according to the latest data released by the Association of Mutual Funds in India. Outflows from credit risk funds, on the other hand, more than tripled to Rs 41.6 billion, the data show.
Investor confidence in the domestic credit market has been shaken by the crisis faced by shadow banks after the default of IL&FS Group in September. This past week, the bad news roared back, with troubled Dewan Housing Finance’s rating cut to default and that of Eros International Media Ltd. lowered 10 notches on concern about its ability to repay debt.
Assets held by overnight funds, a category that has seen a spate of new offerings recently, totaled Rs 137 billion at the end of May, AMFI data show. Sovereign debt funds, in comparison, just managed Rs 77 billion.