Most fund managers expect that bond fund returns for fiscal 2004 were likely to range between 8.5-9.5%. The returns were unlikely to breach 10% even if the Reserve Bank of India cut interest rates in credit policy, due on Nov. 3.
In the last two financial years, bond funds gave an average return of 15-16% on the back of a sharp fall in interest rates, where capital appreciation contributed as much as 40-50% in total returns.
Early expectations
At the start of the current year, fund managers expected returns to broadly drop to 6.5-7.5% for the full year due to a sharp fall in coupon income while little upside was seen in bond prices, as interest rates were believed to have stabilised.
