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Stagger entry into longer-duration funds over next six months: Experts

To stay safe, keep bulk of portfolio in shorter-duration or target maturity funds

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As interest rates rise, prices of longer-duration bonds fall more, so the net asset values (NAVs) of longer-duration funds take a bigger hit.

Sarbajeet K Sen

4 min read Last Updated : Oct 13 2022 | 10:04 PM IST

The Reserve Bank of India (RBI) has hiked the repo rate by 190 basis points (bps) since May 2022. Increasingly, the view within the debt market is that we are approaching the peak of the current rate hike cycle. Investors are keen to know how they should structure their debt fund portfolios in this environment, and whether they should enter longer-duration funds.

The rate impact

It is better to stick to shorter-duration funds in a rising interest rate scenario. These funds hold bonds which mature faster. As interest rates rise, their portfolios invest in newer, higher-yielding bonds. Their average portfolio

Topics : Reserve Bank of India longer-duration funds RBI Interest rate hike repo rate Fed rates US Federal Reserve portfolio liquid funds PSU Debt Funds

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