The budget hasn't been music to the bond market. Apart from pushing the 10-year bond yield up by nine basis points, it has strengthened the case against long-term debt funds. Mutual fund advisors believe that the higher fiscal-deficit target announced in the budget is the final call for investors to get out of long-term bond funds.
"The benchmark 10-year bonds slumped after the government set a higher-than-expected fiscal deficit target. This definitely had a knee-jerk reaction in the bond market. But, one thing is for sure, that the long-term debt schemes, the income funds, gilt funds, etc, would be a very volatile in the near future. It is only good for investors who can't withstand volatility to stay away from these schemes," says Lakshmi Iyer, CIO-debt and head-products, Kotak Mutual Fund.
