The Securities and Exchange Board of India (Sebi) capped mutual fund investments in debt instruments, especially with reference to AT1 (Additional Tier-1) bonds. Accordingly, no mutual fund scheme will be allowed to invest more than 10% of its debt assets in such bonds and not more than 5% in the bonds of a single issuer. This decision sent shock waves across the equity and debt markets. Let us discuss in detail on what is an AT1 bond and why Sebi placed such restrictions from the investors’ perspective.
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