Bonds had a stellar 2020. The CRISIL Composite Bond Index (a widely used benchmark for bonds) was up about 12 percent. Yields dropped to multi-year lows in 2020, as the RBI cut policy rates by 115 basis points (bps) in 2020 to an all-time low of 4 percent and supported the economy through a slew of liquidity measures. Bond price gains were made across major debt mutual fund categories. Medium-term duration, long-term and high-quality (AAA) corporate, public sector undertaking (PSU) bond and short-term funds delivered superior returns. Only low-quality corporate bonds had another painful year as the credit environment worsened amid rising defaults and downgrades.
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