Opt for shorter-term debt funds

With RBI holding on to rates, investors should avoid longer duration funds for the near future

With the Reserve Bank of India (RBI) keeping its benchmark rate unchanged, bond market players believe yields could rise further. In the past month, the benchmark 10-year government bond yield has already crept up to from 6.48 to 6.70 per cent, an increase of 29 basis points (bps). This happened after gross domestic product (GDP) growth fell to a three-year low of 5.7 per cent, giving rise to fear that the government might have to borrow more for pump-priming the economy. And, rising yields mean debt fund investors should be staying invested in short-term funds, rather than medium or longer-term