homepersonal finance NewsAssessing debt funds amid stable inflation and steady interest rates: Is now the time to invest?
Assessing debt funds amid stable inflation and steady interest rates: Is now the time to invest?
In the ever-evolving landscape of investments, understanding the dynamics of various categories becomes crucial for investors. One area that has recently sparked interest is the debt category. With inflation taking a breather and interest rates potentially holding steady, the question arises: Is now a good time to explore debt funds?
Understanding the nuances of different investment categories is pivotal in today's ever-changing investment landscape. Lately, the spotlight has turned towards the debt category, especially with inflation stabilising and interest rates likely to remain steady. The question arises: Is this the right time to delve into debt funds?
Sandeep Yadav, Head of Fixed Income at DSP Mutual Fund, sheds light on the current scenario. He points out, "In India, where inflation tends to fluctuate, various factors are influencing the yields in debt funds, leading them lower."
Yadav underscores the cyclical nature of debt funds due to ongoing interest rate cycles. Highlighting that yields are currently at multi-year highs, he sees this as an opportune moment for investors. As yields decrease, according to him, debt funds become more appealing.
"In the current scenario as yields decrease," Yadav elaborates, "investors should focus on specific factors while considering fixed income funds."
He advises close monitoring of the Reserve Bank of India's (RBI) policy rates and corresponding interest rate shifts, emphasising their pivotal role in shaping fixed income investment landscapes. Alongside RBI-related factors, Yadav suggests considering fiscal policies. While acknowledging the challenge for retail investors in deciphering fiscal policy, he recommends keeping an eye on budget and post-budget updates. These provide insight into potential yield movements for the upcoming year.
Yadav stresses the significance of a global perspective. He notes, "When retail investors venture into equity, they assess global yield trends and global equity indices." Global yields can influence Indian yields just as global equities affect domestic markets.
Regarding debt fund selection, Yadav highlights, "Debt investments are generally seen as defensive. Within the defensive realm of debt, there exist both defensive and aggressive categories."
He recommends that when yields decline, it's advantageous to opt for a more aggressive segment within the debt category, specifically long-duration or long-tenure bonds. He suggests considering dynamic bond fund categories as an excellent choice for this purpose, along with medium-duration fund categories.
Here's a look at 6-month return of some of the low duration funds:
| Scheme Name | 6-month |
| SBI Magnum Low Duration Fund - Direct Plan - Growth | 3.52% |
| HSBC Low Duration Fund - Direct Plan - Growth | 3.70% |
| Aditya Birla Sun Life Low Duration Fund - Direct Plan - Growth | 3.62% |
| Axis Treasury Advantage Fund - Direct Plan - Growth | 3.43% |
| Kotak Low Duration Fund - Direct Plan - Growth | 3.60% |
| Nippon India Low Duration Fund - Direct Plan - Growth | 3.47% |
(Source: Moneycontrol)
Essentially, Yadav proposes adjusting investment strategies based on yield movements within the debt category to potentially enhance returns for investors.
(Edited by : Anshul)
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
Supreme Court says it may consider interim bail for Arvind Kejriwal due to ongoing Lok Sabha polls
May 3, 2024 4:57 PM
10% discount on fare on Mumbai Metro lines 2 and 7A on May 20
May 3, 2024 2:40 PM