Not the time for credit risk, investors should stay away from debt funds

Given that the Covid crisis could lead to more defaults by companies, investors are better off staying away from such funds

Vivike Agrawal’s faith in debt funds has been shaken considerably since Franklin Templeton Mutual Fund (FT) suddenly declared to investors, on Thursday, that it is shutting down six schemes with assets of about Rs 26,000 crore. The 46-year-old self-employed had invested Rs 50 lakh in Franklin India Short Term Income Fund in 2015. Last month, he redeemed Rs 25 lakh and reinvested in Franklin India Liquid Fund–Super Institutional Plan. 

“The proceeds were to be utilised for my son’s higher education. Since I can’t do anything about the money frozen in the schemes, I have put redemption requests on all other