Debt fund NAVs are falling. What should investors do?

The recent increase in the 10-year benchmark bond yield has impacted the NAVs of debt funds. The yield and price of the bonds are inversely related. When the yield goes up, the prices of bonds fall. Since the yields went up recently, the prices of the bonds currently held by the debt funds came down and this resulted in the fall in the NAV of the funds. The simple thumb rule for investing in debt is: when the interest rates are around or below 6%, it is better to invest in debt funds like liquid funds or ultra-short duration funds or low duration funds.

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