Debt funds have witnessed a huge outflow in September. Should investors be worried?
The volatility at the equity markets is a well-known fact and there are phases when it might underperform. During such uncertain times, it is necessary to park some funds in debt products. Debt mutual funds primarily invest in fixed income instruments like government securities, bonds, treasury bills and money market instruments. They are best suited for the investors who do not want to take chances by investing in a highly volatile equity market. But what happens when the debt funds themselves go through myriad uncertainties?
The mutual fund industry’s asset under management (AUM) stood at 22.04 lakh crore (trillion) in September, a dip of 12.5 per cent against the AUM of 25.20 lakh crore in August. The debt funds for September saw the outflows of 2,44,522 crore.
Rahul Singh, Fund Manager (Fixed Income), LIC Mutual Fund Asset Management, said “Outflow was triggered mostly due to three reasons - default by infrastructure finance company IL&FS, negative interest rate views and liquidity issues in non-banking finance corporation (NBFC) and housing finance sector.
Let’s take a look at how the prevailing scenario is impacting the investors, and what should they do in a volatile time ahead, which is expected to stay for a longer period than anticipated.
Domino Effect
A recent shocking default over asset-liability mismatches at IL&FS led to panic in the Indian financial sector. The investors are worried about its impact on the credit market as well as on other NBFC’s.
Mahendra Kumar Jajoo, Head (Fixed Income), Mirae Asset Global Investments (India), said, “Mutual funds provide the safest and fastest exit of all options and therefore it’s no surprise that panicked investors rushed out of debt mutual funds.”
This story is from the November 2018 edition of Outlook Money.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the November 2018 edition of Outlook Money.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber? Sign In
7 Steps To Refresh Your Finances In The New FY
Setting goals and then making your money work to achieve them can be a gamechanger for your financial life
Turn Of The Tide: Should You Invest In Debt Funds Now?
The past few years have been challenging for debt fund investors, but the case for adding them in your portfolio is now more compelling than ever
Who Should Choose An Index Fund?
Index funds’ returns are similar to their underlying index, so if cost and protection are high on your list and market-beating performance is secondary, they could be an ideal choice.
What Is Depreciation?
Depreciation indicates a reduction in the value of an asset over time. Typically, it occurs due to wear and tear of the asset over time as a result of continued use to calculate the depreciation of an asset, one needs to consider several factors, one of which is the useful life of the asset.
REGULATORY ROUNDUP
Change: The Securities and Exchange Board of India (Sebi) directs asset management companies (AMCs) to conduct stress tests on small and mid-cap funds and disclose key findings on liquidity and other aspects.
Plan Repayment Before Taking Loan
I have a home loan running but need a loan of around `10 lakh for renovating the house.
Fund Life Goals Before Business
I am in my late 20s and want to invest in the real estate sector.
SECRET ROAD TO FINANCIAL DIGNITY
Dignity is something most retirees want once their active work life comes to an end and it is closely tied to the individual’s financial well-being
'Combined Life, Health Plans Won't Increase Complexity'
The life insurance market in India has recorded a consistent premium growth over the years, but insurance penetration is yet to reach the desired level. Quite in line, HDFC Life Insurance has shown a growth of 5 per cent year-on-year in its total annual premium equivalent in the nine months until December 2023 and has grown on other parameters as well. Its assets under management (AUM) went up 20 per cent, while it recorded a net profit of 16 per cent y-o-y, in the period. Even in terms of penetration, the company’s growth in Tier II and Tier II cities are positive. Vibha Padalkar, managing director and chief executive officer of HDFC Life Insurance shared the secret sauce for the growth in a conversation with Nidhi Sinha, editor, Outlook Money, talked about the challenges the insurance industry faces, and the road ahead in view of recent regulatory proposals. Edited excerpts:
BUCKET YOUR WORRIES AWAY
Once you have accumulated a decent corpus in your working life, the next big task should be to smartly deploy it across different schemes through a bucketing strategy so that your regular expenses are taken care of while your corpus keeps growing. This will ensure that you do not outlive your corpus