RBI cutting CRR is being looked upon as the beginning of the interest rate cycle reversal in India. Investors ought to be cautious in ducking the losses and pouncing on opportunities
Unlike a few shockers in last calendar year, the Reserve Bank of India (RBI) lived up to the expectations in terms of the monetary policy review and brought the Cash Reserve Ratio (CRR) down by 0.5 basis point. This has invited mixed reactions from the mutual fund industry which are largely positive and not-so-happy ones.
The positive reactions are obvious, but the industry is also considering the reduction in CRR as a mild policy measure. On the other hand, the RBI’s stance also sends a clear signal of interest rates cooling down in the future if things move as they have been in national and international economies.
The immediate impact of the RBI policy was temporary losses by debt mutual funds. The prices of the debt instruments go down when the yields go up and hence, as per the opinion of the fixed income fund managers, yields of long-term bond will come down though, there could be a temporary surge providing the much required opportunity to recover the losses by the debt mutual funds. This may mean that the temporary losses incurred by debt mutual fund investors on Tuesday may be reversed quickly.
Trading at 8.14%, 10 year bonds came down to 8.08% following the CRR cut. The benchmark 10-year yield to trade is expected to remain in the range of 8.15 to 8.30% per annum.
There are fears of uncertainty in the debt markets in the short term which might hamper the investments in the debt instruments. But the investors must remain cautious as the interest rate cycle is expected to be reversed soon. The volatility always brings opportunity. Therefore, on the one hand, the investments in debt funds might look unattractive but at every interval of the reversing interest rate cycle will be laying the opportunities to park funds in the Fixed Maturity Plans (FMPs) to gain from the deferring rates of interest.
MF UPDATE
Union KBC launches Dynamic Bond Fund
Union KBC MF has launched a new fund namely, Union KBC Dynamic Bond Fund, an open ended debt scheme. The face value of the scheme is Rs. 10 per unit. The new issue opened for subscription on 23rd January 2012 and will close on 6th February 2012. The investment objective of the scheme is to actively manage a portfolio of good quality debt as well as money market instruments so as to provide reasonable returns and liquidity to the investors. The minimum application amount is Rs. 5000 and in multiples of Re. 1 thereafter. Exit load charge will be 0.50% if units redeemed or switched out within 3 months from the date of allotment and 0.25% if units redeemed or switched out after 3 months and up to 6 months from the date of allotment. The performance of the scheme will be benchmarked against CRISIL Composite Bond Fund Index and will be managed by Parijat Agrawal.
Franklin Templeton declares dividend under its two schemes
Franklin Templeton MF has declared dividend under Franklin India Bluechip Fund and FT India Dynamic PE Ratio Fund of Funds, on the face value of Rs. 10 per unit. The quantum of dividend will be Rs. 3 per unit for Franklin India Bluechip Fund. Moreover, the quantum of dividend will be Rs. 0.44 per unit for individuals & HUF and Rs. 0.377 per unit for others under FT India Dynamic PE Ratio Fund of Funds. The record date for dividend distribution will be 27th January 2012.
Edelweiss announces dividend under its scheme
Edelweiss MF has announced dividend under Edelweiss Absolute Return Fund, an open ended equity scheme. The quantum of dividend will be Rs. 0.18 per unit on the face value of Rs. 10 per unit. The investment objective of the scheme is to generate absolute returns with low volatility over a longer tenure of time. The record date for dividend distribution will be 27th January 2012.
IDFC declares dividend under its two schemes
IDFC MF has declared dividend under IDFC Super Saver Income Fund-Medium Term Fund - Plan A and IDFC Ultra Short Term Fund - Plan A. The quantum of dividend for distribution will be Rs. 0.2057 per unit subject to availability of distributable surplus for IDFC Super Saver Income Fund-Medium Term Fund - Plan A (Bi-monthly dividend option). Moreover, for IDFC Ultra Short Term Fund - Plan A (Periodic Dividend Option) the quantum of dividend for distribution will be Rs 0. 2375 per unit subject to availability of distributable surplus. The record date for dividend distribution will be 30th January 2012.
Escorts declares dividend under its schemes
Escorts MF has declared dividend under Escorts Income Plan, Escorts Short Term Debt Fund and Escorts Income Bond Scheme, on the face value of Rs. 10 per unit. The quantum of dividend for distribution will be Rs. 0.07 per unit, Rs. 0.11 per unit and Rs. 0.10 per unit for Escorts Income Plan, Escorts Short Term Debt Fund and Escorts Income Bond Scheme respectively. The record date for dividend distribution has been fixed as 31st January 2012.
