Investors flee debt funds as credit quality slumps to lowest in 16 months

Cracks in the money market that started with IL&FS Group's default last year widened in June after mortgage lender Dewan Housing Finance Ltd. delayed debt payments

Investors are fleeing from India’s debt funds at the fastest pace in a year as wariness mounts amid widening cracks in the nation’s credit market.

Monthly net outflows from the fixed-income funds jumped to Rs 1.7 trillion ($25 billion) in June, the most in at least a year, estimates provided by Morningstar Investment Adviser India show. The data include all types of debt funds that invest in corporate and government bonds of different maturities and that are sold to both individual and institutional buyers.

The outflux, partly driven by companies redeeming investments to pay quarterly taxes to the federal government, was accentuated