'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.
Despite the Reserve Bank of India's (RBI) and the government's recent initiatives to attract foreign capital, which are expected to alleviate pressure on long-duration bonds, most debt fund managers are maintaining a cautious stance, favouring shorter-duration papers due to global uncertainties and potential future rate hikes.
ICICI Bank, India's second-largest private-sector lender, is set to raise approximately $500 million through an overseas dollar bond issuance, marking its first such move in nearly a decade. This fundraising effort will utilise the Reserve Bank of India's (RBI) concessional swap window, a facility designed to reduce hedging costs for foreign currency borrowings.
A new report by Motilal Oswal Financial Services Ltd (MOFSL) indicates that inflation, interest rates, and monetary policy have become more significant drivers of gold prices than traditional geopolitical conflicts, with markets increasingly focusing on these economic factors.
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.
'I don't see fear becoming a dominant factor for retail investors.'
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.
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.
IT stocks had their worst first half fall in decades, with the Nifty IT index declining 31% in the January-June 2026 period, its biggest decline in the first six months of a calendar year since 2003.
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.
The asymmetry in deposit and credit growth is the biggest challenge before the Indian banking industry. For every 100 deposit that a bank mobilises, it needs to keep 3 with the banking regulator in the form of cash reserve ratio on which it doesn't earn any interest. Another 18 is used for buying government bonds (statutory liquidity ratio). This means, a bank is left with 79 for giving credit. Add to this, its capital which can be used for giving loans. Most banks are facing a fund crunch. They need to find ways to attract deposits if they want to sustain credit growth, explains Tamal Bandyopadhyay.
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.
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.
Investors who decide to enter medium to long-duration funds should be cognisant of the risk.
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.
Select the exact category by matching your investment horizon to the portfolio duration, suggests Sanjay Kumar Singh.
P V Subramanyam clears some misconceptions about debt funds.
We will explore some of the reasons why a stock-only portfolio may no longer be sufficient and some of the modern alternatives and strategies that can help investors build resilient and profitable portfolios.
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.
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.
'Your decisions should not be driven by your view on the market, but by your objectives, risk appetite, and time horizon.'
Omkeshwar Singh, Head, Rank MF, a mutual fund investment platform, answers your queries.
'They can transition from short to long-duration funds when the yield curve normalises.'
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.
If you are in credit opportunity funds, income funds or dynamic bond funds for a long-term goal, stay put.
Domestic mutual funds have infused the highest ever -- Rs 4.84 trillion -- this year amid strong inflows via SIPs.
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.
'If rate cuts happen, bond yields will come down and investors will make mark-to-market capital gains on them.'
Ask rediffGURU and PF expert Nitin Narkhede your mutual fund and personal finance-related questions.
'When markets go into a budget with excessive optimism, the risk of disappointment is higher.'
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
'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.'
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.
'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.
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.
