The gilt rush: Investors gild their portfolios in 'peak yield' euphoria

Government bond funds net Rs 2,000 crore investments in October

Gilt funds are experiencing a resurgence in demand, likely driven by the anticipation that government bond yields have reached their peak. In October, investors infused Rs 2,000 crore into gilt funds, marking the highest inflow in three years, excluding the Rs 4,400 crore received in March 2023 following the tax change.

Gilt funds, primarily investing in government bonds, are favoured for longer-duration investments. With an average portfolio maturity of four to seven years, they are more sensitive to interest rate changes, making them better positioned to benefit from potential interest rate cuts.

Over the past year, gilt funds have delivered returns ranging