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RBI has kept the repo rate unchanged at 6.50% at its recent Monetary Policy Committee (MPC) meet. This is the fourth consecutive MPC meet where the Central Bank continued with the pause.
But what does this mean for mutual fund investors? And which funds should they look at in the current scenario? In this regard, we reached out to fund house representatives and MFDs who shared with us their picks of the season.
Fund house representatives
Kaustubh Gupta, Co-Head Fixed Income, ABSL MF
Investors with a 3 to 12-month investment horizon should match their investments with the fund duration and invest in ultra-short, low duration or floating rate funds. On the other hand, where the horizon is of over 12 months, they can look at actively managed gilt and income or short-term funds. Besides, long term investors with a 3-year-plus horizon can opt for dynamic bond or target maturity funds.
Puneet Pal, Head-Fixed Income, PGIM India MF
In the case of a medium to long term investment horizon, investors can look at funds having a duration of 3 to 4 years with predominant sovereign holdings for a better risk-reward. On the other hand, where the investment horizon is 6 to 12 months, they can consider money market funds as yields are pretty attractive in the 1-year segment of the curve.
Sandeep Bagla, CEO, Trust MF
Short duration funds offer high accrual income along with low interest rate risks and hence, make sense in the current times. Investors can consider investing on a piecemeal basis over the next 3-6 months say once every month or two months and hold on for at least 2-3 years. This strategy will ensure investments are made when yields are elevated and they can benefit from capital gains once the interest rates dip.
Mutual fund distributors
Chokkalingam Palaniappan, Founder and Director, Prakala Wealth
Quality credit risk and corporate bond funds are offering good yields upward of 7%. It appears to be the right time to lock in the rates since once the repo starts falling, there is a potential to make total returns of 8.5-9% through capital gains. However, investors should hold on to their investments for at least two years. Investors with a higher risk appetite can invest in gilt funds with a 7-year or 10-year maturity profile.
Sadashiv Phene
Since the yields are currently high, investing in duration or dynamic funds have the potential to generate superior returns than fixed deposit and will pay in the long run. However, investors should invest for an investment horizon of more than 3 years.
Shifali Satsangee, Founder & CEO, Funds Ve'daa
It appears to be an ideal time to position for a repo rate cut through dynamic bond funds. This is more suitable for aggressive investors who can continue to stay invested till the rate cuts take place so that they can make decent capital gains. Hence, this calls for a longer investment horizon.
