Ever since the Reserve Bank of India (RBI) cut the repo rate by 25 basis points (bps) earlier this month, there has been a lot of noise around fixed income funds and whether it was time to exit or if there is still some steam left in these funds. There are many types of fixed income funds, and all will not be impacted by the rate cut immediately. One basis point is one-hundredth of a percentage point.
Immediate impact of repo rate changes is more likely to be seen in funds that have a high allocation to long-tenure bonds (primarily government bonds). Income funds and gilt funds fall in this category and such funds are opportunistic in nature.
