On October 6th, the Reserve Bank of India (RBI) and the Monetary Policy Committee (MPC) surprised the market by unveiling an Open Market Operations (OMO) bond sales program. This unexpected move caused a significant uptick in the yield of Indian 10-year bonds, pushing it from its previous closing rate of 7.21% to 7.35%.
Adding to this financial development, JPMorgan Chase & Co. made an announcement regarding the inclusion of Indian government bonds (IGBs) in its benchmark Emerging Market index, starting from June 28, 2024. According to Morgan Stanley, this inclusion is anticipated to attract inflows of approximately $40 billion into India.
Joydeep Sen, a Corporate Trainer & Author, in an interview with CNBC-TV18, expressed optimism about the impact of this news on debt funds, emphasising that longer maturity debt funds would likely see the greatest benefits compared to their shorter-term counterparts as the yields are likely to ease going ahead.
For those considering fresh investments in debt funds, Sen recommended opening new folios to take advantage of taxation benefits.
Notably, in the Budget of 2023, the government introduced changes to the taxation of capital gains from debt mutual funds. Government announced that from April 1, 2023, these gains will be categorised as short-term capital gains. Additionally, debt funds held for more than three years will no longer qualify for indexation benefits and will no longer be eligible for the 20% tax rate.
Watch accompanying video for entire conversation.
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