If liquid and short-term debt funds gave negative returns in March 2020 when the Franklin Templeton fiasco was on in full swing, duration funds turned negative in March 2021. Most debt schemes with long-duration investments, which had delivered double-digit returns in 2020, are back at single digits now. Experts blame volatility in bond yields for such a high variation in returns in the short term.
Debt funds are considered safe as they hold fixed-income securities. However, as the above examples show, this is not true. “Debt mutual funds are subject to mark-to-market valuation on a daily basis due to yield fluctuations which, many times, may lead to negative returns in the short term. However, this is a short-lived phenomenon as, over a longer period, you should generally earn what was the yield-to-maturity at the time of your investments unless there are some defaults in the underlying portfolio,” says Raghvendra Nath, Managing Director, Ladderup Wealth Management.
Apart from these risks, the debt fund universe is complex, with as many as 16 categories. The performance of each category depends on the interest rate cycle. When interest rates rise, short-duration funds such as liquid and ultra-short-term funds do well, but long-duration funds turn risky. The opposite happens when rates are falling. Since interest rates were falling, duration funds such as gilt funds were giving double-digit returns in the first part of FY21. A different story will play out in FY22 as the yield curve rises.
This story is from the May 02, 2021 edition of Business Today.
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 May 02, 2021 edition of Business Today.
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
"Understand what drives key talent"
Novartis India is a part of the Basel, Switzerland-headquartered pharma major Novartis AG
MILLENNIALS MISSING HOME
SKY-HIGH PROPERTY PRICES, COUPLED WITH SLOW INCOME GROWTH, HAVE MADE THE DREAM OF OWNING A HOME A DISTANT ONE FOR MANY MILLENNIALS. THIS COULD LEAD TO STAGNATION IN SOCIAL MOBILITY AND POTENTIALLY DEEPEN EXISTING SOCIAL INEQUALITIES
SIGNATURE MOVE
SIGNATURE GLOBAL, A LEADER IN AFFORDABLE HOUSING, IS LOOKING TO GET BACK IN THE BLACK WITH A SHIFT IN FOCUS TO MID-SEGMENT AND PREMIUM HOUSING AFTER LOW-COST PROJECTS BECAME UNVIABLE FOR DEVELOPERS
MAKING A MARK
PHARMA MAJOR GLENMARK IS STRATEGICALLY PLOTTING ITS WAY UP, ALL BY SHIFTING ITS FOCUS TO BRANDED AND SPECIALITY MEDICINE AND ENSURING IT GETS ITS R&D RIGHT
TIME TO UNSHACKLE?
YOUNG INDIA IS OBSESSED WITH APPS. BUT THE GATEWAY TO THEM IS CLOSELY GUARDED BY TWO TECH BEHEMOTHS-GOOGLE AND APPLE-WHO CONTROL 99% OF THE MARKET IN INDIA. IS IT TIME FOR INDIA TO BREAK FREE FROM THIS DUOPOLY AND HAVE ITS OWN APP STORE?
DIGITAL DICHOTOMY
Where does one draw the line between protecting consumer interests and maintaining market freedom? Industry and experts are debating this even as the Digital Competition Bill seeks to rein in Big Tech firms in India, the world's second-largest internet market
"ChatGPT helped people understand the benefits of using AI"
Humane Inc. Co-founders Imran Chaudhri and Bethany Bongiorno on AI, their product, the company's vision, and more
ON THE FAST TRACK
THE DEDICATED FREIGHT CORRIDORS (DFC) NETWORK OF THE INDIAN RAILWAYS HAS STARTED ATTRACTING MORE FREIGHT PLAYERS. FROM CONNECTING MAJOR PORTS TO CRISS-CROSSING MULTIMODAL LOGISTICS PARKS, DFCS ARE SET TO BE A GAME CHANGER FOR FREIGHT SERVICES IN INDIA
WE HAVE A MODEL MADE IN INDIA, FOR INDIA, AND BY INDIA"
Manish Tiwary, Country Manager of Amazon India, on the opportunities in the country, digital, and more
WHAT THE FUTURE HOLDS FOR AMAZON INDIA
THE E-COMMERCE GIANT HAS SEEN STEADY GROWTH SINCE ITS ENTRY INTO INDIA IN 2013, BUT THE OFFLINE PIECE REMAINS A CHALLENGE. AFTER LOSING OUT ON THE FUTURE RETAIL ACQUISITION, HOW DOES IT PLAN TO KEEP THE GROWTH ENGINES REVVING?