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Hold On To Debt Funds

Monday, April 23, 2012
By Anand Birai

When there is euphoria with the Reserve Bank of India (RBI) reducing repo rate by 50 basis points, the debt investors might rush in to redeem apprehending a reduction in interest rates. Here is a piece of advice why investors should still stay invested in debt/income funds.

The returns from debt/income funds are still attractive. Over 50 debt funds have given returns over 8% over a year and 16 funds have posted more than 10% annual return with Canara Robeco InDiGo Fund (Growth) topping the table with 14.47% return. The apprehension of high interest rate era coming to end is not a fallacy but there is still time for it.

It is after hiking the rates 13 times from March 2010 to October 2011, RBI has now reduced the rates. The rates which were going up for 18 months are not going to come down to their original levels quite soon. Therefore, there is still ample of breathing space for the investors to switch from debt instruments.

There are several reasons why the rates will take good long time to come down. One, the inflationary concerns are still hovering over and RBI has indicated that it will remain cautious about it. Nonetheless, the Central Bank has also asked not to expect cut in the rates every now and then.

With the focus on growth of the economy, when RBI will take cautious steps, upcoming monsoon will play a critical role on the inflationary pressures. The food-inflation was one of the main concerns and the monsoons hold key to its future.

Even the equity markets are still sailing through some rough waters due to ongoing European economic crisis. If it was not enough, the chief economist Kaushik Basu has come up with a statement that the economic reforms in India will gain momentum only after general elections in 2014 indicating not so big news for the markets till then.

FUND UPDATE
IDBI declares dividend under IDBI Monthly Income Plan  

IDBI MF has declared dividend for IDBI Monthly Income Plan under quarterly dividend option, on the face value of Rs. 10 per unit. The quantum of dividend for distribution will be Rs. 0.25 per unit as on the record date. The investment objective of the scheme is to provide regular income along with opportunities for capital appreciation through investments in a diversified basket of debt, equity and money market instruments. The record date for dividend distribution is 18th April 2012.

UTI declares dividend for UTI Opportunities Fund  

UTI MF has declared dividend under UTI Opportunities Fund on the face value of Rs. 10 per unit. The quantum of dividend for distribution will be Rs. 0.90 per unit. The record date for dividend distribution has been fixed as 19th April 2012.

Principal revises exit load for its two schemes  
Principal MF has announced to revise exit load structure under Principal Bank CD Fund and Principal Near Term Fund - Corporate Bond Plan, effective from 16th April 2012. Accordingly, an exit load of 0.25% will be charged if units are redeemed on or before 6 months from the date of allotment under Principal Bank CD Fund. Moreover, for Principal Near Term Fund - Corporate Bond Plan, the revised exit load of 2% will be charged if units are redeemed on or before 12 months from the date of allotment and 1% will be charged if units are redeemed after 12 months but before 24 months from the date of allotment.

Birla Sun Life announces revision in fund management responsibilities  
Birla Sun Life MF has announced revision in fund management responsibilities, with effect from 17th April 2012. Accordingly, Maneesh Dangi will manage Birla Sun Life Medium Term Plan and Kaustubh Gupta will manage Birla Sun Life Savings Fund. All other features and terms and conditions of the schemes shall remain unchanged.

IDBI announces dividend for IDBI Monthly Income Plan  
IDBI MF has announced dividend for IDBI Monthly Income Plan under its quarterly dividend options. The quantum of dividend for distribution will be Rs. 0.25 per unit on the face value of Rs. 10 per unit. The record date for dividend distribution is 18th April 2012.

UTI withdraws benchmark index for UTI Infrastructure Fund  
UTI MF has withdrawn the request of change in benchmark index under UTI Infrastructure Fund which was made on 9th March 2011. Earlier, it was decided to change the benchmark index from BSE 100 Index to UTI Infrastructure Index. But, UTI Infrastructure Fund is still being benchmarked against BSE 100 Index.

Axis revises exit load under Axis Income Fund  
Axis MF has announced to revise exit load structure under Axis Income Fund. Accordingly, an exit load of 1% will be charged if units are redeemed or switched out within 12 months from the date of allotment. The revised structure of exit load will be effective from 19th April 2012.

TOP PERFORMING funds
   
Scheme Name                            Nature              1 M %          6 M %          1 Y %         3 Y %   
SBI Magnum Sector Funds          Equity               10.71           9.57              17.33          42.63
Canara Robeco InDiGo Fun           Debt                  1.47            4.86              14.47            -
ICICI Prudential Balance           Balanced               2.34            8.06               6.03           20.51
Taurus MIP Advantage Fun            MIP                  1.77            7.84              11.02             -
Escorts Liquid Plan - Gr              Liquid                   0.9             5.21             10.48            8.04
ICICI Prudential RIGHT F              ELSS                 4.21            9.87               8.59              -
MOSt Shares NASDAQ 100          ETF                   3.1             20.32             36.69             -
Baroda Pioneer Gilt Fund               Gilt                  1.22             8.77              12.96          12.23
HDFC Index Fund - Sensex           Index                 1.89            4.04              -5.07            20.48

*Note:- Returns calculated for less than 1 year are Absolute returns and returns calculated for more than 1 year are compounded annualized. NAV as on April 19, 2012

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