Income, dynamic bond funds to gain from monetary easing
The RBI, in its mid-quarter review of monetary policy on Tuesday, kept the repo rate unchanged at 8%, a move that was anticipated by a wide section of analysts. However, contrary to expectations, the central bank chose not to go ahead with the anticipated 25-basis point reduction in the cash reserve ratio.
“Debt products with duration calls will start giving higher returns. These include dynamic bond funds, income funds and gilt funds with maturity of two-and-a-half years and above,” said Killol Pandya, head - fixed income, Daiwa Asset Management. “All these products have a lock-in, and those who are comfortable locking in their money for at least six months or more should look at them,” he said.
And while corporate interest in liquid funds will continue, retail and high net worth individuals could move to duration products, which are likely to fetch double-digit returns. “Liquid and liquid-plus funds enjoyed huge popularity this year, even among investors with a longer investment horizon. Now that the cycle is turning, these funds might see some marginal redemption pressure on the retail and HNI side,” said Pandya. Liquid funds gave average returns of 9.27% in calendar year 2012.
Dwijendra Srivastava, head – fixed income, Sundaram MF, believes that investment in
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