 "Gilt funds back on investors' radar; segment sees inflows of Rs 986 crore")
Gilt funds, which invest primarily in government securities (G-Sec), are once again back on investors' radar as rate cut hopes rise. After a brief lull during February-March, when inflows in the gilt schemes substantially declined compared with the immediate previous months, the fund category has witnessed fresh interest.
The current financial year has begun on a positive note for Gilt funds as the category could attract a fresh net inflows of a little less than a thousand crore rupees. This is contrary to the anticipation of industry's fixed income fund managers who had been expecting a gradual decline in money flows.
Navneet Munot, chief investment officer (CIO) at SBI Asset Management, says, "During April, at one point of time 10 year bond yield was close to 8 per cent where lot of investors got in. Considering the size of papers which government issues the size of gilt funds is still very small. There is huge potential in this segment."
Though, post RBI policy the yield curve weakened but given the current signals emanating from the central bank, industry executives feel that going forward there would be sharp rate cuts which would benefit the gilt funds.
Agrees Murthy Nagarajan, head of fixed income at Tata Mutual Fund. "I believe that inflation from hereon will continue to show downward trend. I expect a 75 basis points (bps) cut in rates which will positively impact returns from gilt schemes. I understand, investors can still make a double-digit returns in gilts from a one year perspective."
According to fund managers, investors who had invested during FY13 made easily 12-14 per cent returns. "Though, now the returns may not be that higher but one can expect 8-10 per cent gains going forward," they add.
As per the data from Value Research Online, one year category average return from medium and long term gilt funds is around 14.5 per cent as on 14 May while during the last six months (when expectations of rate cuts were strong), the category emerged as the third best segment with a return of 9 plus per cent.
At a time when equity segment has been losing investors' base continuously for last few years, gilts have shown a positive momentum. Since March, 2012 the gilt segment saw a remarkable increase in its investors' base which has almost doubled from 33,453 to 63,890 as per the latest statistics available from industry body Association of Mutual Funds in India (Amfi).
The current financial year has begun on a positive note for Gilt funds as the category could attract a fresh net inflows of a little less than a thousand crore rupees. This is contrary to the anticipation of industry's fixed income fund managers who had been expecting a gradual decline in money flows.
Navneet Munot, chief investment officer (CIO) at SBI Asset Management, says, "During April, at one point of time 10 year bond yield was close to 8 per cent where lot of investors got in. Considering the size of papers which government issues the size of gilt funds is still very small. There is huge potential in this segment."
More From This Section
Currently, gilt schemes contribute merely one percentage of India's total mutual fund assets at Rs 9,181 crore. Industry offers 43 gilt funds as on 30 April, 2013.
Though, post RBI policy the yield curve weakened but given the current signals emanating from the central bank, industry executives feel that going forward there would be sharp rate cuts which would benefit the gilt funds.
Agrees Murthy Nagarajan, head of fixed income at Tata Mutual Fund. "I believe that inflation from hereon will continue to show downward trend. I expect a 75 basis points (bps) cut in rates which will positively impact returns from gilt schemes. I understand, investors can still make a double-digit returns in gilts from a one year perspective."
According to fund managers, investors who had invested during FY13 made easily 12-14 per cent returns. "Though, now the returns may not be that higher but one can expect 8-10 per cent gains going forward," they add.
As per the data from Value Research Online, one year category average return from medium and long term gilt funds is around 14.5 per cent as on 14 May while during the last six months (when expectations of rate cuts were strong), the category emerged as the third best segment with a return of 9 plus per cent.
At a time when equity segment has been losing investors' base continuously for last few years, gilts have shown a positive momentum. Since March, 2012 the gilt segment saw a remarkable increase in its investors' base which has almost doubled from 33,453 to 63,890 as per the latest statistics available from industry body Association of Mutual Funds in India (Amfi).