Let’s jump to the brass tacks. Your debt funds took a knock on Tuesday July 16. And it has everything to do with the RBI’s unexpected moves to curb the rupee’s depreciation against the dollar.
We had some of you writing to us asking what went wrong with debt funds and what needs to be done. So let me try to place things in perspective.
But before that, our suggestion to you would be – don’t panic. The debt market is already running a discount sale. Get what I mean?
The move
First, almost all economists and fund managers were caught off guard by the RBI’s move late Monday to suck liquidity from the system by resorting to 3 key moves: one, borrowing by banks under the liquidity adjustment facility (LAF) was restricted. The rate of borrowing under the marginal standing facility or MSF, which is used by banks to borrow from the RBI in times of acute liquidity distress, was hiked. Three, the RBI will carry out open market sale of bonds.
Now the first two moves meant that banks and finance institutions sold their money market and debt holdings to meet their liquidity requirements. That resulted in a fall in price of bonds across various categories and a rise in price of yields (yields and bond prices being inversely related).
Hence, debt funds holding these instruments too fell. While few funds remained flat, the highest fall was 3.9%. The fall was highest in gilt funds and least in liquid funds.
Temporary move
Before we move to the impact, it is important to know that this is viewed as a temporary measure taken by the RBI to curtail the rupee fall ( as told by then Chief Economic Advisor). That means, it will likely be reversed when the rupee stabilizes. Now, when that will happen is a question that simply stumps me at this point.
All that can be said is that the RBI resorted to a similar move in 1997-98 and reversed it after 2.5 months.
This time, much would depend on how the rupee responds, at least sentimentally, to other swift government moves such as increasing the FDI cap across sectors to ensure more dollar flow.
Also, the liquidity sucking measures are unlikely to remain in picture too long given that it can have a significant impact on economic growth (as there would be lower credit available for companies to invest and grow). The Finance Minister too, has stated that growth will remain a priority.
If you were to consider this as a bitter pill remedy, then the slide in your NAV needs to be viewed as a slip; that means they would bounce back.
What it means for funds
As discussed earlier, there was an across-the-board fall in prices of debt funds, including liquid funds. Now, it is true that liquid funds are generally considered safe. But, with a fall of this magnitude, liquid funds were required to ‘revalue’ their NAVs at fair value in line with the market moves. But these are ‘mark-to-market’ adjustments.
That means, if a liquid fund simply held its instruments till the underlying maturity, they would actually recover. For you, it probably means a week to 15 days (depending on how much the fund fell) to recover the capital lost, if any, and then the normal accrual (interest income) would start to kick in.
For funds with short to medium maturity, the loss may take longer to recoup as their maturity date is longer and funds would have to technically hold them to maturity to get the accrual income.
In all this, remember, there is no credit default. Only a rate risk has occurred. That means, a fund will recover its investment and the return by simply holding it.
For long-dated bonds, without doubt, the tides have to turn (yield should stabilize and then fall) before investors can manage returns. But when the tides do turn, it would be as swift as this fall. That means, the opportunity for quick returns has become elevated in this segment, albeit writ with volatility.
What you can do
The first thing in your to-do list would be not to resort to panic selling. Remember, what you are holding now is a ‘market-linked loss’ which will hopefully reverse over a period (sooner in short-term funds). By selling now, you are simply crystallizing these ‘book losses’ in to a real capital loss.
From the fund house angle, a redemption pressure from investors at this point would force fund managers to sell instruments at cheap prices and incur losses, instead of simply holding them and benefit from the accruals later. Hence, your selling in panic will only prevent the fund managers from doing what is best for your portfolio.
Here’s what you can do:
– If you have near-term requirement for your money lying in debt funds, take stock of it after a couple of weeks, whatever be the nature of fund. This can definitely mitigate the losses you may be sitting with, today. As the outlook over the next month or two appears extremely uncertain, you may wish to take the money out for your near-term requirement, but exit when the dust settles.
– If you are holding liquid and ultra short-term funds and need the money in a month or 2, the above still holds good to ensure you do not lose capital. But if you do not need the money and it is simply a contingent fund, you could just hold. The ‘carry’ on these funds would actually provide better returns after a while.
– If you are holding short-term debt funds and have a year’s time, then you have a better chance of a capital appreciation.
– If you have income/gilt funds which you invested for the long term, then you may consider holding them for not less than 2 years, to be able to gain the most.
– If you are invested in any duration funds with a time frame in mind and have run part of the course already (say you bought 6 months ago) then you should consider holding the fund through the original time frame with which you bought or were advised.
– If you had taken speculative calls, especially in long-dated funds such as gilts, then your uncertainty just got worse.
Remember, a reversal of this swift fall can be equally rapid. When a debt rally does happen, it is unlikely that you will have time to react to or gauge the situation. When we talk of a rally of not less than 150 basis points (on an average, based on the latest yield rise), a single rally could mean a 25-50 basis point rally. That would mean there could hardly be time to react.
Hence, while the near term volatility and pain can test your patience, the gains, when they eventually do happen may compensate well. But remember that also means, you should grin and bear over the next quarter or more.
New investors
If you have been looking to invest in debt funds, then the next few weeks could provide very good opportunities for you to invest if you have the grit to. Imagine this to be a distress sale.
But then, let me add that your money could take a roller coaster ride and remain volatile for a quarter or two. That means, if you invest now you should do so with a view of at least 2 years.
For this time frame, income funds would fit the bill well. Ensure that you invest in a phased manner.
While gilt funds would provide opportunities, the current fall is a good example of how sharply gilt funds can be hit. So do measure your risk-taking ability before you take the jump.
One other opportunity in the debt space is FMPs with a 1-2 year time frame. FMPS that are issued in the next several weeks would lock in to very high certificates of deposits. One-year CDs closed at 10.28% on Tuesday and may remain about those levels for a few weeks.
Short-term debt funds would be an option for those with the above time frame but with ability to take higher risks than FMPs and do not wish to lock their money.
In all, let’s view this as a slip and not a fall.
- Notice Cum Addendum For The Merger Of Navi Conservative Hybrid Fund Into Navi Aggressive Hybrid Fund & Navi Overnight Fund Into Navi Liquid Fund
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Wealth Conversations – October 2024
Thanks Vidya, great report as usual 🙂
I am planning to invest in debt funds over this week – so, just the article I was looking for.
I understand you mentioned this is a good time for new investors – do you recommend to go with a heavy initial investment plus followed by staggered MIPs, since the NAVs will be lower now?
Also, can you recommend some good debt funds to invest in for a period of 5-10 years please? What are the pointers you would look for?
Regards,
Pradeep
Hello Pradeep,
I would suggest spread out investments (not heavy in the first one) in 4-5 installment spanning 4-5 months..that too taking a call in subsequent months as to how the currency plays out. For debt funds, you may look at those with medium portfolio maturity of say 2-5 years. Pl see http://www.fundsindia.com/select-funds (debt funds-long term) for funds with the above criteria. Thanks, Vidya
Gracias madam!
I think FII’s entry in Debt market (facilitated by govt. policy of increasing the ceiling) has changed the whole dynamics of debt funds. They are no longer safe. Before 16th July, we had one round of sharp intense selling by FIIs last month and the yields went up. This was followed by another shock on 16th July due to RBI policies. As long as Rupee continues the weak trend, FIIs are likely to sale more in debt market and the yields will keep climbing. RBI action on 16th July is also a reaction to weak rupee, but unfortunately it is just treating the symptoms and not tackling the root cause. I can’t imagine what will happen if rumors of RBI HIKING interest rates comes true. Thats a hanging sword.
Wow !! What an analysis !!! I Salute you !! even i am the victim of volatility and my L&T Gilt fund was down 2.5% on a single day … erasing my gains from 7.5% to 5.8% 🙁 🙁 ….but i will wait .. once the trend reverses i should see double digit gains !!
In the next two weeks i’am expecting some lumpsum money and i was planning to put it in a liquid fund as a contingency/emergency whatever you may call. simply put as of now i dont need it and i dont know when i might need it, so no where should i put this money?
Hi Suhas, Liquid funds remain good options for contingency purpose. tks, Vidya
Beautiful Article!! Totally agreed!!
Vidya, great blog as usual. You mention: “For this time frame, income funds would fit the bill well. Ensure that you invest in a phased manner.”
By “phased manner”, do you mean SIPs? Also, Can you recommend a few income funds that fit the bill in this scenario?
Thanks,
/a
hello Apporv,
By ‘phased manner’ I meant investing in a staggered way over the next several months (4-6) based on further market moves..such as whether the rupee stabilises or not. Hence it may have to be an active approach only, given the uncertainty. You may pl look for income funds in the ‘Debt funds long term’ category of our select funds: http://www.fundsindia.com/select-funds
tks
Vidya
Well written mam !!
really relieved our most anexity…
Thanks
Thanks Vidya, great report as usual 🙂
I am planning to invest in debt funds over this week – so, just the article I was looking for.
I understand you mentioned this is a good time for new investors – do you recommend to go with a heavy initial investment plus followed by staggered MIPs, since the NAVs will be lower now?
Also, can you recommend some good debt funds to invest in for a period of 5-10 years please? What are the pointers you would look for?
Regards,
Pradeep
Hello Pradeep,
I would suggest spread out investments (not heavy in the first one) in 4-5 installment spanning 4-5 months..that too taking a call in subsequent months as to how the currency plays out. For debt funds, you may look at those with medium portfolio maturity of say 2-5 years. Pl see http://www.fundsindia.com/select-funds (debt funds-long term) for funds with the above criteria. Thanks, Vidya
Gracias madam!
I think FII’s entry in Debt market (facilitated by govt. policy of increasing the ceiling) has changed the whole dynamics of debt funds. They are no longer safe. Before 16th July, we had one round of sharp intense selling by FIIs last month and the yields went up. This was followed by another shock on 16th July due to RBI policies. As long as Rupee continues the weak trend, FIIs are likely to sale more in debt market and the yields will keep climbing. RBI action on 16th July is also a reaction to weak rupee, but unfortunately it is just treating the symptoms and not tackling the root cause. I can’t imagine what will happen if rumors of RBI HIKING interest rates comes true. Thats a hanging sword.
So if there are extra funds, is it a good time to invest more into long term gilts and income funds?
Hello Sheetal,
I have mentioned that it may be a good opportunity if you have a 2-3 year time frame and provided you can take some volatility. By volatility, I mean further fall. Hence, it is good to invest in a staggered manner say over the next few months.We also mentioned that gilt would be riskier going by how they fell (and can fall in case of further volatility). tks, Vidya
Wow !! What an analysis !!! I Salute you !! even i am the victim of volatility and my L&T Gilt fund was down 2.5% on a single day … erasing my gains from 7.5% to 5.8% 🙁 🙁 ….but i will wait .. once the trend reverses i should see double digit gains !!
In the next two weeks i’am expecting some lumpsum money and i was planning to put it in a liquid fund as a contingency/emergency whatever you may call. simply put as of now i dont need it and i dont know when i might need it, so no where should i put this money?
Hi Suhas, Liquid funds remain good options for contingency purpose. tks, Vidya
Beautiful Article!! Totally agreed!!
So if there are extra funds, is it a good time to invest more into long term gilts and income funds?
Hello Sheetal,
I have mentioned that it may be a good opportunity if you have a 2-3 year time frame and provided you can take some volatility. By volatility, I mean further fall. Hence, it is good to invest in a staggered manner say over the next few months.We also mentioned that gilt would be riskier going by how they fell (and can fall in case of further volatility). tks, Vidya
Dear Vidya,
Yet again, a wonderful, insight and timely article…
I was shocked to see my Debt Fund in Red for the first time since 4 months.
Will you consider this as a buying oppurtunity (in a staggered manner over the next 3-4 weeks) into a Dynamic Bond Fund which i am holding for a period of 3 Years??
Thanks in Advance,
Sunil.
Hello Sunil, I would think it is a buying opportunity only if you can take on volatility and buy in a staggered manner over the course of the next 2-4 months. I reckon, it might take a month or 2 to even know where the rupee is headed. And then there will be one more shock by way of slower credit growth in banks and perhaps higher inflation. So too many variable to watch and that is not possible in few weeks. Tks, Vidya
Hi Vidya,
I had invested 13 lacs in Birla Dynamic Bond fund last year May 2012 with quarterly STP of rs. 30000. As on today i am standing at CAGR return of 9%. Shall i continue or withdraw my money and switch to liquid fund until the matter(currency volatility) is cleared out.
I wish to go long term debt funds with same STP options , can go for half yearly or yearly.SO shall i continue for Birla Dynamc bond or switch
Please advice.
Hi barkha, income funds require a 2-3 year time frame to deliver, if you had invested with such a duration in mind you should consider sticking to it. For further fund queries on schemes invested with FundsIndia, request you to use the ‘Ask Advisor’ feature available to all our account-activated investors. tks, Vidya
Dear Vidya,
Simply Superb Article, clearly explains my doubts on recent activities in indian debt market… Thanks a lot …!
Tks & Rgds
Sankar Prasath V
Dear Vidya Madam,
I am 30 years male and I plan to invest One Lakh in UTI Mutual funds.
My investment Horizon is 15 years and my Target amount at maturity( @45 years age) is 6-7 Lakhs.I would like to diversify my portfolio by investing this amount in atleast 3-4 MF schemes of UTI (25,000-35,000 INR in each),but I am bit confused as to which ones to choose.
Presently I am thinking of allocating 33% to equity linked,33% to Bond Funds and other 33% to Pharmaceutical Related Funds.
Your Feedback on what schemes to choose to achieve the desired Target in the given time frame would be appreciated.
Yours Sincerely
Cosme
Hello sir, Thank you for taking the time to comment in the forum. Portfolio reviews and recommendations are available to our investors free of charge if they use the ‘Ask Advisor’ feature in their FundsIndia account. I would be constrained from taking portfolio queries through this forum. Thanks, Vidya
Love to hear from you about Sector Funds…. especially the beaten down one’s of Power and Infra along with FMCG and Banking….
Thanks,
Sunil.
Thanks Sunil. We do not currently have any view on sector funds, given the high level of uncertainty. Other than FMCG (which remains highly priced), all the other sectors mentioned by you are still reeling under different issues require signs of economic revival to pick up. Banks, are expected to come under pressure next quarter as a result of the recent RBI’s liquidity moves. Tks.
Hello Mam
This is an excellent analysis. I especially liked the point wherein you asked investors not to resort to panic selling and thereby convert notional losses to real losses and also about the importance of holding the fund to maturity.
But this incident brings to light the fact that debt funds are also volatile and not the “no-risk” types as they are projected. So, an investor needs to invest in a fund keeping the underlying average maturity of the fund and the requirement of funds.
Thank you again for the excellent analysis.
Abhinav
Hello Abhinav, Thanks. As you rightly said, debt funds are certainly not free of risk. But within the debt fund category, one may choose varying degrees of risks.
Any product linked to the market, including many insurance products carry market risks. Just that their risk does not come to light as nobody tracks them on a daily NAV basis.
Also, this is not the first time that debt funds have fallen. In 2008 end too, a sudden increase in yields led to many gilt funds falling much more sharply. That is why retail investors will do well not to take directional bets on debt funds unless they have the expertise. It is best to use ebt funds as a good diversifier in a mutual fund portfolio and as an instrument to prop returns in a traditional debt product-laden portfolio.
Tks, Vidya
Dear Vidya,
Fantastic article. Your message is pretty clear:
“Do not sell in Panic, do not buy in Panic” I wrote a new post with this title and simply put the link to this post in it.
This article is like Eärendil (an LOTR reference). May it serve as a light in dark times for debt fund investors.
Thank you Galadriel 🙂
Dear Pattu,
Thank you. It is an honour to be even linked to anything from LOTR :-). tks, Vidya
Thanks for the article.
I have invested already in g sec and dynamic bond funds.
I’m ready to stay invested till the interest rate cycle is over.
Should I consider this as a buying opportunity?
Which one would you advice?
Dynamic bond funds or G-secs?
Hello Hari, Depends on how much volatility you can handle. Less volatility then dynamic bond fudns with lower average maturity (less than 5 yrs). Tks, Vidya
I am planning to buy debt funds for 2- 3 yr horizon. is it a good time? Also any suggestions. I was looking @ templeton income builder
Hello sir, Pl. use our ‘Ask Advisor’ features for portfolio queries, thanks
RBI measures might be temporary but what about FII selling? The first fall was due to them. If Bernanke mentions about QE tapering then FIIs are going to dump the bonds and NAVs will fall further. QE tapering is very much a possibility in the next few months. This has been overlooked in this article.
hello sir, FIIs hold 5% of total India bonds. That’s not high. It is the rupee depreciation that is a concern from rapid FII selling; and not really the bond market. This is why when bond markets in other emerging markets fell drastically, Indian bond markets did not. Hope this answers your query. This was why the article did not take cognisance of this issue. Thanks.
Hi Vidya,
I have some idle funds and was looking to park them in liquid fund for a max 1 yr and I might require them in between. I was also considering investment in equity funds by switching out of this liquid fund but in an adhoc manner and not by STP.
How safe will the fresh investment in liquid funds be in the current volatile scenario? Also is there an added opportunity to gain in liquid funds by way recovery in NAVs due to reversal of MTM losses?
Thanks Sumit
Hi Sumit, If your holding period at any point is not less than 1-2 months, then it can be reasonably safe. Gains come not directly from reversal of MTM losses, but new instruments that come in at higher yields. Hence yes there is an opportunity there. Thanks, Vidya
Hi Vidya,
I have some idle funds and was looking to park them in liquid fund for a max 1 yr and I might require them in between. I was also considering investment in equity funds by switching out of this liquid fund but in an adhoc manner and not by STP.
How safe will the fresh investment in liquid funds be in the current volatile scenario? Also is there an added opportunity to gain in liquid funds by way recovery in NAVs due to reversal of MTM losses?
Thanks Sumit
Hi Sumit, If your holding period at any point is not less than 1-2 months, then it can be reasonably safe. Gains come not directly from reversal of MTM losses, but new instruments that come in at higher yields. Hence yes there is an opportunity there. Thanks, Vidya
Hi Vidya, got your point . The short term rates can possibly rise and the liquid funds stand to gain in new instruments.
In case the existing investors book out at lower NAV and the new investors get in at the same time….in such a situation do the latter get benefitted on recovery of market value of existing instruments? If yes, I would like to know if fund houses are still facing redemption pressure and if there exists any opportunity on account of this.
And what should be the approach when RBI rolls back the short term measures?
Thanks Sumit
Hi Sumit, I am afraid I have not got your question too well. Yes, if you entered a fund after a hit and stay on till recovery, you do get to benefit more simply because your NAV would have been lower at entry.
Redemption numbers will not be known until MFI monthly data is released.
When RBI rolls back the recent measure, one can expect a quick fall in yields and rally in bond prices. Thanks
Hi,
I have invested heavily in HDFC Floating Rate LT fund. It has lost almost 1.3% in NAV on 16th July.
Should I exit now. I can wait another 2 to 3 months.
Prakash Joshi
22 AUG 2013
hello Prakash, you should not let single day moved to deter you, if you have the same time frame. Will be unable to comment on/recommend the specific funds unless you use our Ask Advisor feature through FundsIndia account. Thanks.
Dear Madam,
Thanks. As I understand you are recommending to immediatelly exit from HDFC floating rate LT fund?
Thanks
Prakh Joshi
Hello Prakash, In my previous comment, I only stated that you should not be put off by single-day movements. No recommendations are made. You may use our ‘Ask Advisor’ feature available to our investors for fund-specific queries. Thanks.
Hi,
I have invested heavily in HDFC Floating Rate LT fund. It has lost almost 1.3% in NAV on 16th July.
Should I exit now. I can wait another 2 to 3 months.
Prakash Joshi
22 AUG 2013
hello Prakash, you should not let single day moved to deter you, if you have the same time frame. Will be unable to comment on/recommend the specific funds unless you use our Ask Advisor feature through FundsIndia account. Thanks.
Dear Madam,
Thanks. As I understand you are recommending to immediatelly exit from HDFC floating rate LT fund?
Thanks
Prakh Joshi
Hello Prakash, In my previous comment, I only stated that you should not be put off by single-day movements. No recommendations are made. You may use our ‘Ask Advisor’ feature available to our investors for fund-specific queries. Thanks.
Dear Madam,
Thank you for the clarification.
Regards,
Prakash Joshi
Dear Vidya,
Fantastic article. Your message is pretty clear:
“Do not sell in Panic, do not buy in Panic” I wrote a new post with this title and simply put the link to this post in it.
This article is like Eärendil (an LOTR reference). May it serve as a light in dark times for debt fund investors.
Thank you Galadriel 🙂
Dear Pattu,
Thank you. It is an honour to be even linked to anything from LOTR :-). tks, Vidya
Hi Vidya,
I had invested 13 lacs in Birla Dynamic Bond fund last year May 2012 with quarterly STP of rs. 30000. As on today i am standing at CAGR return of 9%. Shall i continue or withdraw my money and switch to liquid fund until the matter(currency volatility) is cleared out.
I wish to go long term debt funds with same STP options , can go for half yearly or yearly.SO shall i continue for Birla Dynamc bond or switch
Please advice.
Hi barkha, income funds require a 2-3 year time frame to deliver, if you had invested with such a duration in mind you should consider sticking to it. For further fund queries on schemes invested with FundsIndia, request you to use the ‘Ask Advisor’ feature available to all our account-activated investors. tks, Vidya
Dear Vidya Madam,
I am 30 years male and I plan to invest One Lakh in UTI Mutual funds.
My investment Horizon is 15 years and my Target amount at maturity( @45 years age) is 6-7 Lakhs.I would like to diversify my portfolio by investing this amount in atleast 3-4 MF schemes of UTI (25,000-35,000 INR in each),but I am bit confused as to which ones to choose.
Presently I am thinking of allocating 33% to equity linked,33% to Bond Funds and other 33% to Pharmaceutical Related Funds.
Your Feedback on what schemes to choose to achieve the desired Target in the given time frame would be appreciated.
Yours Sincerely
Cosme
Hello sir, Thank you for taking the time to comment in the forum. Portfolio reviews and recommendations are available to our investors free of charge if they use the ‘Ask Advisor’ feature in their FundsIndia account. I would be constrained from taking portfolio queries through this forum. Thanks, Vidya
Hello Mam
This is an excellent analysis. I especially liked the point wherein you asked investors not to resort to panic selling and thereby convert notional losses to real losses and also about the importance of holding the fund to maturity.
But this incident brings to light the fact that debt funds are also volatile and not the “no-risk” types as they are projected. So, an investor needs to invest in a fund keeping the underlying average maturity of the fund and the requirement of funds.
Thank you again for the excellent analysis.
Abhinav
Hello Abhinav, Thanks. As you rightly said, debt funds are certainly not free of risk. But within the debt fund category, one may choose varying degrees of risks.
Any product linked to the market, including many insurance products carry market risks. Just that their risk does not come to light as nobody tracks them on a daily NAV basis.
Also, this is not the first time that debt funds have fallen. In 2008 end too, a sudden increase in yields led to many gilt funds falling much more sharply. That is why retail investors will do well not to take directional bets on debt funds unless they have the expertise. It is best to use ebt funds as a good diversifier in a mutual fund portfolio and as an instrument to prop returns in a traditional debt product-laden portfolio.
Tks, Vidya
Love to hear from you about Sector Funds…. especially the beaten down one’s of Power and Infra along with FMCG and Banking….
Thanks,
Sunil.
Thanks Sunil. We do not currently have any view on sector funds, given the high level of uncertainty. Other than FMCG (which remains highly priced), all the other sectors mentioned by you are still reeling under different issues require signs of economic revival to pick up. Banks, are expected to come under pressure next quarter as a result of the recent RBI’s liquidity moves. Tks.
Dear Vidya,
Yet again, a wonderful, insight and timely article…
I was shocked to see my Debt Fund in Red for the first time since 4 months.
Will you consider this as a buying oppurtunity (in a staggered manner over the next 3-4 weeks) into a Dynamic Bond Fund which i am holding for a period of 3 Years??
Thanks in Advance,
Sunil.
Hello Sunil, I would think it is a buying opportunity only if you can take on volatility and buy in a staggered manner over the course of the next 2-4 months. I reckon, it might take a month or 2 to even know where the rupee is headed. And then there will be one more shock by way of slower credit growth in banks and perhaps higher inflation. So too many variable to watch and that is not possible in few weeks. Tks, Vidya
Dear Vidya,
Simply Superb Article, clearly explains my doubts on recent activities in indian debt market… Thanks a lot …!
Tks & Rgds
Sankar Prasath V
RBI measures might be temporary but what about FII selling? The first fall was due to them. If Bernanke mentions about QE tapering then FIIs are going to dump the bonds and NAVs will fall further. QE tapering is very much a possibility in the next few months. This has been overlooked in this article.
hello sir, FIIs hold 5% of total India bonds. That’s not high. It is the rupee depreciation that is a concern from rapid FII selling; and not really the bond market. This is why when bond markets in other emerging markets fell drastically, Indian bond markets did not. Hope this answers your query. This was why the article did not take cognisance of this issue. Thanks.
I am planning to buy debt funds for 2- 3 yr horizon. is it a good time? Also any suggestions. I was looking @ templeton income builder
Hello sir, Pl. use our ‘Ask Advisor’ features for portfolio queries, thanks
Thanks for the article.
I have invested already in g sec and dynamic bond funds.
I’m ready to stay invested till the interest rate cycle is over.
Should I consider this as a buying opportunity?
Which one would you advice?
Dynamic bond funds or G-secs?
Hello Hari, Depends on how much volatility you can handle. Less volatility then dynamic bond fudns with lower average maturity (less than 5 yrs). Tks, Vidya
Dear Madam,
Thank you for the clarification.
Regards,
Prakash Joshi
Hi Vidya, got your point . The short term rates can possibly rise and the liquid funds stand to gain in new instruments.
In case the existing investors book out at lower NAV and the new investors get in at the same time….in such a situation do the latter get benefitted on recovery of market value of existing instruments? If yes, I would like to know if fund houses are still facing redemption pressure and if there exists any opportunity on account of this.
And what should be the approach when RBI rolls back the short term measures?
Thanks Sumit
Hi Sumit, I am afraid I have not got your question too well. Yes, if you entered a fund after a hit and stay on till recovery, you do get to benefit more simply because your NAV would have been lower at entry.
Redemption numbers will not be known until MFI monthly data is released.
When RBI rolls back the recent measure, one can expect a quick fall in yields and rally in bond prices. Thanks
Well written mam !!
really relieved our most anexity…
Thanks
Vidya, great blog as usual. You mention: “For this time frame, income funds would fit the bill well. Ensure that you invest in a phased manner.”
By “phased manner”, do you mean SIPs? Also, Can you recommend a few income funds that fit the bill in this scenario?
Thanks,
/a
hello Apporv,
By ‘phased manner’ I meant investing in a staggered way over the next several months (4-6) based on further market moves..such as whether the rupee stabilises or not. Hence it may have to be an active approach only, given the uncertainty. You may pl look for income funds in the ‘Debt funds long term’ category of our select funds: http://www.fundsindia.com/select-funds
tks
Vidya