Forty two medium-term debt funds have given an average monthly return of 0.95 per cent as on August 29, 2002. The fall in the month-on-month return in August has been mainly due to the narrowing down of the yield spread in the gilts market, according to fund sources.
The yield on the 10-year benchmark gilts has been varying between 7.17-7.18 per cent and once touched 7.23 per cent during the current month. This provides little appreciation in bond prices. In fact, short-end rates have fallen sharply. The market has, more or less, remained stable, according to a source at a leading fund house.
PNB Debt tops the return chart for August with a 1.53 per cent appreciation in net asset value (NAV) from Rs 16.34 as on August 1 to Rs 16.59 as on August 29. ING Income Portfolio has returned 1.35 per cent during the period.
Some of the other significant gainers during the period include UTI Bond (return 1.28 per cent), IL&FS Bond (1.22 per cent), Reliance Income (1.21 per cent), Grindlays Super Saver Income Fund (1.21 per cent), Birla Income Plus (1.18 per cent), SUN F&C Bond (1.17 per cent), JM Income Fund (1.16 per cent), Sundaram Bond Saver (1.16 per cent) and LIC Bond (1.15 per cent). The only loser among these funds is Dundee Bond PSU, which has given a negative monthly return of 0.08 per cent as on August 29.
Fund managers have also been increasing the portfolio maturity of bond funds, in order to benefit from any short rally in the bond market. The market is expecting a bank rate and a repo rate cut on a 50 basis points in the next couple of months, the source added.
Fund houses are at times forced to become aggressive, as a lot of corporate as well as institutional investors have been investing in these schemes who are traders rather than investors.
The source said,Although debt schemes continue to receive sizeable inflows, there are hardly any investors out there. Most of them are traders and fund managers cannot afford to lose any profit booking opportunity.