Short duration debt schemes are a better choice for the immediate future, suggests Alok Singh, Head - Fixed Income & Structured Products, BNP Paribas Mutual Fund, in an email interview with Ravi Samalad
What type of debt funds would you want distributors to recommend to their clients in the current scenario?
The fund needs to be selected on the basis of investment horizon and the investment objective of the investor. In the current rising interest rate scenario, low duration funds are expected to do better than those with higher duration fund in the immediate future.
How would debt schemes be impacted as interest rates further harden in the short term?
The interest rates have already risen very sharply in the past few months. Any further increase in rates will increase mark to market loss in an existing portfolio that could impact the performance of such fund in the short term. But, it will also make short term rates quite attractive for investing.
Returns from MIPs were not very encouraging during the market crash in 2008. Some schemes even lost the principal. Would you recommend MIPs now?
In the recent past, rising interest rates have hurt returns in debt market and equity markets have also remained volatile. Since MIPs invest both in debt and equity, the volatility in both the markets has resulted in under performance. On the long-term basis, investing in MIPs may be a sensible choice.
The DTC has proposed change in the holding period in debt schemes for indexation benefits. Is it a matter of concern?
Debt will continue to be a major asset class and the proposed change is not a matter of major concern.
