The debt mutual funds in March witnessed highest outflows in six months. Among the categories, liquid funds saw the highest outflow of Rs 56,924.13 crore, followed by money market funds. CNBC-TV18 spoke to Suresh Sadagopan, Founder at Ladder7 Financial Advisories on the same to see how these funds stack up when compared to arbitrage or fixed deposits.
As the financial year 2023 ended on March 2023, investors made various adjustments to their portfolios, including redeeming their investments. One category of mutual funds that saw significant outflows in the month of March was liquid funds.
According to Sadagopan, liquid funds do go out when there is an outflow in terms of taxes, or an outflow in terms of GST payments and other outflows.
"So this is a standard thing which keeps happening every three months, I would say it is a year-end phenomenon," he told CNBC-TV18.
Sadagopan stated that liquid funds are a popular choice for investors looking to invest for the short term. These funds are offering a return of 6 percent per annum, making them an attractive option for investors who want to park their funds for a short period of time.
He added that liquid funds are like a temporary parking and for this 6 percent per annum kind of return is actually a decent return.
One of the significant advantages of liquid funds is that they are considered short-term investments, and there is no taxation change for these investments. This makes them a great option for investors who want to earn higher returns while keeping their tax liability low, experts say.
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