'A dynamic bond fund acts like a gilt fund in a rate cut scenario and like a conservative short-term bond fund when rates rise.'
Before you invest, check the fund manager's track record in managing such a strategy, asserts Sarbajeet K Sen.
Experts say investors need not tinker with their debt portfolio as shifting won't be tax-efficient.
'When interest rates rise, the NAVs of these funds will fall.' However, they won't fall as much as longer-duration funds.
A neutral monetary policy stance, heavy government borrowing, and issuers adjusting to a higher-for-longer yield environment have set the stage for a largely stable corporate bond market in 2026.
India was being evaluated for a potential weight of around 1 per cent in the index, an allocation that could have translated into $25 billion of inflows, spread over roughly 10 months.
With the RBI infusing Rs 7.5 lakh crore in liquidity -- and possibly more in the future -- the short- to medium-term corporate bond market is expected to benefit.
Activity in the corporate bond market is set to gain momentum following a 25-bp policy repo rate cut by the rate-setting panel of the Reserve Bank of India (RBI). State-owned public cebPower Finance Corporation (PFC) and Small Industries Development Bank of India (Sidbi) are planning to raise up to Rs 11,500 crore through bonds on Tuesday as issuers expect borrowing costs to ease.
Investors having a moderate-risk profile can use these funds in their retirement portfolios.
'When markets go into a budget with excessive optimism, the risk of disappointment is higher.'
Domestic mutual funds have infused the highest ever -- Rs 4.84 trillion -- this year amid strong inflows via SIPs.
The Indian metal market is a promising sector to invest in as it provides a good balance between the prospects of growth and stability in dynamic economic conditions and a changing geopolitical environment. Metals such as gold, silver, copper, etc, have gained renewed significance in 2025, amidst growing inflation and India's push towards infrastructural growth and green energy initiatives.
The Indian metal market is a promising sector to invest in as it provides a good balance between the prospects of growth and stability in dynamic economic conditions and a changing geopolitical environment. Metals such as gold, silver, copper, etc, have gained renewed significance in 2025, amidst growing inflation and India's push towards infrastructural growth and green energy initiatives.
Actively managed debt funds with the flexibility to go long on duration made a strong comeback on the returns chart in 2023, thanks to softening bond yields. The average one-year returns of floater, long-duration, gilt, and dynamic bond funds, which ranged between 2.3 per cent and 4.5 per cent at the end of 2022, now stand at over 7.2 per cent, with some schemes delivering over 8.5 per cent, according to data from Value Research. Debt fund returns are inversely related to yields of underlying investments, meaning a decline in yields is positive for funds.
Debt fund managers are reassessing their strategies after the setback delivered by the Reserve Bank of India recently. While most are refraining from any knee-jerk reaction to the central bank's surprise open market operation (OMO) announcements, they are taking a re-look at the duration of their schemes. Sandeep Yadav, head of fixed income at DSP Mutual Fund, said it has trimmed the duration of some schemes, considering the hawkish stance by the RBI.
'Earnings growth will be the main driver of India's market in 2026, with profits expected to rise 9% to 10% in H2 FY26 and accelerate to 12% to 15% in FY27.'
With the interest rate cut cycle nearing its end, several debt fund managers are shifting their focus towards interest income rather than betting on duration in anticipation of capital gains.
The RBI advisory follows a labour ministry request earlier this year seeking the central bank's expertise to identify gaps in EPFO's investment strategy and fund management practices, including accounting, risk management, and internal governance.
Debt mutual fund (MF) schemes are set to register the best calendar year (CY) performance in the last four years despite no changes in the interest rate. An analysis of one-year performance of debt funds show that many of the schemes are set to deliver double-digit returns in CY 2024.
Ask rediffGURU and PF expert Nitin Narkhede your mutual fund and personal finance-related questions.
P V Subramanyam clears some misconceptions about debt funds.
Investors who decide to enter medium to long-duration funds should be cognisant of the risk.
Select the exact category by matching your investment horizon to the portfolio duration, suggests Sanjay Kumar Singh.
'First-time investors, busy professionals, NRIs and those with modest sums looking for curated strategies may find FoFs especially appealing.'
'Your decisions should not be driven by your view on the market, but by your objectives, risk appetite, and time horizon.'
So, the next time someone tempts you with a slightly higher FD rate from a lesser-known bank, point them to hybrid funds that can deliver extra returns without the administrative and emotional rollercoaster.
In the Indian stock market, investors are interested in the actions of both domestic and foreign institutional investors (FIIs and DIIs). These groups have wealth as well as expertise in research, which makes them powerful participants in the Indian stock market. Their buy and sell positions have a large effect on stock prices and market sentiment due to the large volume.
Public sector banks (PSBs) have proposed the Finance Ministry their plan to raise Rs 54,800 crore through Additional Tier-1 (AT-1) and Tier-2 bonds in the current financial year (FY25), 37 per cent more than the Rs 39,880 crore raised in FY24
'They can transition from short to long-duration funds when the yield curve normalises.'
The mutual fund (MF) industry had an action-packed 2023 as it tackled the scrapping of tax benefits for debt fund investors and surging flows into equity funds.
'Investors can consider staying invested in long duration products as there is a possibility of rate cuts in the near term.' Positive macros - lower inflation, high forex reserves and favourable demand-supply dynamics for government bonds - make a strong case for rate cuts from December, says Devang Shah, head of fixed income, Axis Mutual Fund. In an interview with Abhishek Kumar in Mumbai, Shah says this view may not hold true if commodity prices go up sharply.
Those getting into debt instruments like short-term funds, ultra short-term funds and income funds may need to extend their investment horizons or pay higher exit loads. The past couple of months have seen 16 such funds either raising their exit loads or increasing the scheme's lock-in period.
'If rate cuts happen, bond yields will come down and investors will make mark-to-market capital gains on them.'
Omkeshwar Singh, Head, Rank MF, a mutual fund investment platform, answers your queries.
If you are in credit opportunity funds, income funds or dynamic bond funds for a long-term goal, stay put.
'Investors' decisions should reflect their financial goals, risk tolerance, and the amount of gold already present in their portfolio.'
With short-term rates firming up due to tight liquidity conditions, Indian corporates are opting to borrow long term to take advantage of the attractive rates by locking them in these uncertain times. The banking system has a liquidity deficit of over Rs 2 trillion. According to market participants, engineering conglomerate Larsen & Toubro (L&T) raised Rs 1,500 crore through 10-year bonds in December 2024.
Why it is important for investors to select the right product according to their specific investment needs, risk appetite and investment tenure.
For existing investors, it may be prudent to redeem their current investments in gilt or dynamic schemes and invest it in short-term funds, if the exit load is not very high, advises Malhar Majumder.
Regardless of market levels, invest in stocks and equity mutual funds in a staggered manner.
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