Funds sell record Rs22,271 crore of debt in Oct

Mumbai: Indian mutual funds sold debt worth Rs22,271 crore in the first three weeks of October because investors are reluctant to infuse fresh money to replenish outflows caused by a surge of redemptions in a volatile market.

Analysts say the measures taken by the Reserve Bank of India (RBI) to ease a cash and credit crunch will take time to soothe the Rs5.29 trillion mutual fund industry, but inflows should return soon with the overnight inter-bank money market rate declining to around 6.5% from around 20% at the peak.
Higher call rates encourage investors in debt funds, particularly banks, to withdraw money from mutual funds and lend in the overnight call money market to earn more.
RBI has cut its policy rate by 100 basis points and banks’ cash reserve ratio (CRR), or the proportion of deposits that banks need to keep with the central bank, by 250 basis points to release Rs1 trillion into the banking system. One basis point is one-hundredth of a percentage point. Besides, it also created a Rs20,000 crore liquidity window for mutual funds.
So far, mutual funds have drawn only Rs8,800 crore from this window. On Friday, there was no taker.

Read more at Livemint