Its Time for Duration Funds Again!!!

Over past one month both G-secs and corporate bonds have rallied with fall in yields by approx 100 to 200 bps on account of the certain factors in the market. Though our medium to long term view is still biased towards further fall in interest rates there can be volatility due to short periods of negative returns on account of profit booking and fresh supply after the recent rally in G-secs and corporate Bonds.

Going ahead, we expect a favourable scenario for debt markets on account of expectations of falling inflation, falling interest rate scenario, moderation in credit growth leading to additional demand for g-secs, improving liquidity in the system and declining GDP growth. In view of the above we recommend, Investors with longer investment horizon and slight appetite for risk to consider investment in long duration funds like Income and Gilt funds. Investors with preference for shorter duration (portfolio average maturity of approx around 2-2.5 yrs) and short term fixed maturity plan investors with a slight appetite for risk can consider investment in Short term fund with a medium term investment horizon.