Market Turmoil Drives ₹2.19 Trillion into Debt Funds in April, Highest Since 2005

In April, investors largely shifted their focus to debt mutual funds as a defensive move against market volatility. Net inflows into debt-oriented schemes reached a staggering ₹2.19 trillion, the highest monthly figure since January 2005. This stands in stark contrast to March, when debt funds saw outflows of ₹2.02 trillion, highlighting how quickly sentiment can change when uncertainty spikes.

Within the debt category, liquid funds attracted the most money—about ₹1.18 trillion—because they offer high liquidity and relatively stable returns.

Money market funds received ₹31,507 crore, while ultra-short duration funds saw ₹26,733 crore of inflows, according to data from the Association of Mutual Funds in India (AMFI). These segments often serve as the first stop for investors seeking safety while waiting for clearer market signals.

“Investors are favouring debt schemes for their stability and liquidity, especially given geopolitical uncertainties and market fluctuations,” said Suranjana Borthakur, Head of Distribution and Strategic Alliances at Mirae Asset Investment Managers (India).

“The significant inflows into arbitrage funds at ₹11,790 crore, a nine-month high, further underscores this preference for low-risk options as investors await clearer signals.”

Global Cues and Domestic Reaction

Cooler-than-expected U.S. Consumer Price Index (CPI) data in early June rekindled hopes for a Federal Reserve pause, boosting global risk assets midweek. Weak May PMI data from China on June 2 dented Asian peers on Monday, initially pressuring Indian markets. Renewed optimism over a possible ceasefire in Eastern Europe and easing tensions between India and Pakistan helped arrest selling pressure by Thursday.

On June 6, RBI surprised markets with a 50 bps rate cut and a 100 bps CRR reduction, sparking one-day gains of roughly 1% in Nifty and Sensex.

Nifty 50: Range, Support, and Resistance

The Nifty 50 traded within a 24,800–25,100 range for most of the week.

• Monday (June 2): It opened at 24,669.70 and slipped to 24,600 as China PMI worries peaked.
• Wednesday (June 4): It climbed to 24,945.80 after the U.S. CPI data, recovering losses.
• Friday (June 6): It closed at 25,003.05, its best close in three weeks, boosted by RBI’s rate cut and broad-based banking and IT buying.

Support hovered around 24,800, with a breach below testing 24,500. Resistance lay at 25,150–25,200, with a sustained breakout paving the way to 25,500–25,700.

Sensex: Sectoral Contributors

The BSE Sensex closed at 82,188.99, up 1.5% week-on-week.

• Banking: HDFC Bank’s net profit jumped 20% YoY, driving broader banking buying, as HDFC Bank and ICICI Bank rallied after strong Q4 results.
• IT: Infosys and TCS gained 4% and 3%, respectively, after Infosys raised FY26 revenue guidance and U.S. Fed signals eased.
• Auto: Maruti Suzuki gained 2.8% after May sales surged to 120,000 units (+8% YoY), while M&M rose 1.5% on higher tractor shipments.
• Pharma: Divi’s Labs climbed 3% on upbeat analyst upgrades; Sun Pharma fell 2% amid generic pricing pressures.
• FMCG: Defensive names like Hindustan Unilever and ITC remained rangebound as rural demand moderated.

Midcap and Smallcap Indices: Risk Appetite

Investors showed higher risk appetite in midcap and smallcap segments.

• Nifty Midcap 100 rose 1.8%, with pharma and consumer durables leading; Jubilant Industries and Voltas gained over 3%.
• Nifty Smallcap 100 outperformed, up 2.3%, driven by auto ancillaries and smaller financial services names.

Profit-booking emerged on Thursday in overextended smallcaps, cautioning traders to monitor valuations closely.

Bond Yields and FII/DII Flows

The 10-year government bond yield ended at 6.2237% on Friday, down from 6.55% on Monday, reflecting volatility after the rate cut.

• FIIs were net buyers of Indian equities to the tune of ₹1,200 crore over the week, reversing three weeks of outflows. They also bought ₹200 crore in debt, attracted by stable yields.
• DIIs remained net sellers, offloading roughly ₹500 crore in equities and shifting funds to debt and gold amid geopolitical caution.

Commodities and Currency Impact

Brent crude traded near $78/barrel, down about 5% week-on-week after OPEC+ extended production cuts, easing cost pressures for Indian corporates.

Gold held around ₹63,000/10g, buoyed by softer global yields and safe-haven demand amid geopolitical tensions.

USD/INR closed at ₹85.6250, a modest depreciation from ₹85.79 on Thursday, supported by RBI easing and renewed FII inflows.

Corporate Earnings and Previews

• HDFC Bank (Q4): Net profit rose 20% YoY, beating estimates, leading to a 3% stock rally. Management guided 15–17% loan growth in FY26.
• Infosys (Q4): Revenue grew 7% YoY to ₹1.14 lakh crore, and FY26 constant-currency guidance was raised to 9–10%, sending the stock up 4%.
• Maruti Suzuki (May sales): Domestic wholesales reached 120,000 units, up 8% YoY, while exports remained flat, bolstering auto sector confidence.
• Tata Steel (April production): Metallurgical output climbed 25% YoY on higher plant utilization, supporting metal stocks.

Next week, investor attention will shift to the June RBI Policy Meeting (June 7) and U.S. May jobs data (June 7), which could impact global liquidity and local sentiment.

Technical Take: Key Levels to Watch

Nifty 50

• Support: 24,800 / 24,900
• Resistance: 25,150 / 25,200
• Momentum: RSI around 64 (neutral); MACD showed a bullish crossover on June 4.

Sensex

• Support: 81,500 / 81,800
• Resistance: 82,300 / 82,500
• Breadth: Advancers outnumbered decliners 1.3:1 on Friday, signaling healthy participation.

A sustained close above resistance could target Nifty 50 at 25,500 and Sensex at 83,000. Conversely, a break below support may test Nifty 50 at 24,600 and Sensex at 81,200.

Looking Ahead: Themes for the Next Week

1. RBI Policy Outcome: Markets expect a pause with commentary on inflation trajectory; RBI’s stance will influence bond yields and bank shares.
2. U.S. Jobs Report: June U.S. nonfarm payrolls (June 7) will test Fed pause expectations; a strong print could push yields higher.
3. China PMI (June 5): Continued manufacturing softness may impact India’s export-oriented sectors and commodity demand.
4. Corporate Earnings: Q1 previews from Bajaj Finance, Nestlé India, and Wipro will be under scrutiny, especially commentary on consumer demand and digital trends.

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