As valuations in the mid-cap and small-cap spaces are rich, with short odds on a retreat in the coming months, investors would be better off buying into long-duration debt on expectations of a start to the rate easing cycle, now expected toward the latter half of FY25.
The US Fed has indicated it will cut interest rates in the latter half of 2024. It is an opportunity for investors to invest in debt funds and lock into current high yields and potential for future capital gains.
Equity mutual funds experienced a 16% decrease in March inflows, totaling Rs 22,633.15 crore. Sectoral/thematic funds led with Rs 7,917.72 crore inflows, while smallcap funds faced outflows of Rs 94.17 crore.
India's top performing mutual fund schemes in March 2024 indiainfoline.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from indiainfoline.com Daily Mail and Mail on Sunday newspapers.
These schemes invest at least 80% of their corpus in the papers of the highest-rated companies. This makes them relatively safer than other debt schemes such as credit risk funds. They are also safer than gilt funds and long term debt funds that are highly sensitive to interest rate changes in the economy.
During rate falling scenario, long term instruments are believed to be a rational investment choice. Moreover, Indian bond market is seen to be in a better shape with the upcoming bond index inclusion.
​Whenever the central or state government needs funds, it is arranged by the Reserve Bank of India (RBI) on behalf of the government. The central bank raises this money from investors such as banks and insurance companies through auctions where it issues government securities or Gsecs having a fixed tenure.
​Whenever the central or state government needs funds, it is arranged by the Reserve Bank of India (RBI) on behalf of the government. The central bank raises this money from investors such as banks and insurance companies through auctions where it issues government securities or Gsecs having a fixed tenure.
Anand Varadarajan says investors can consider Gilt funds or Ultra category for different time horizons. The bond market is making peace with rate cuts. SIP contributions are rising due to the financialization of savings. Infra and banking sectors offer growth opportunities. Retail investors are now becoming crucial for the equity markets.