Mutual fund debt portfolio certainly offers a smart and an efficient approach to holding investment in the Debt Market.  Debt market across the world is adversely impacted on account post Covid-19 liquidity Surge. While this Surge should not be confused with the underlying strength in the global economy, yet it has brought in cheap money driving the Yield to downward trajectory across the globe and in a varied category of debt instrument. The West and US are reeling under even bigger problems on account of low to Negative Growth coupled with liquidity surge. This is one of the main reasons why we often hear about negative yields in these countries in the Bond market. This negative yield is practically exposing the sovereign strength of the nation in the money market. Even a growing economy like Germany has recently encountered this problem. Post covid -19 it is going to be a herculean task for the Central Banker of these nations and nightmare for the respective Bond Investor.  

Thanks to Indian macroeconomic parameters, we do not have such acute problems in Indian debt market. We certainly are enjoying the fruit of a growing economy along with disciplined monetary policy. Profuse Complement must be awarded to RBI in handling the Liquidity Inflation and Interest rate in Indian context. We would soon write another detailed write up on relation of these macro parameters and Impact of RBI policy on these macros. Yet there is a greater need of review and care needed in Indian context also.

Given the present Global and Domestic situation, in Indian context, both Capital market Fixed Income instruments and Bank fixed deposits are becoming unattractive from an investment point of view. But Still not to be forgotten that Debt investment offers stability liquidity and tax efficiency to our investment portfolio. Hence we should never say no even at this Juncture. Choose a Mutual fund debt portfolio as it has the advantage of diversification ahead of individual fixed income security. This diversification would take care of any credit risk, which is quite possible in a downturn of the economy. These days mutual fund Debt portfolios with shorter duration versions are quite stable with competitive yield in the market.  The Shorter duration means the Average maturity of Scheme portfolio.it should not be construed as an investor holding horizon. An investor can continue to hold for longer and longer in an open ended Short duration debt portfolio. Once recovery in the Global economy, medication of Covid-19 and Stability in commodity price specially oil reverts to normalcy, the Bond Yield would definitely change.  The central Bank of the respective country will bring control to easy flow of liquidity. Depending upon domestic economic parameters, they may also reverse the easy liquidity stream. The Short duration Bond portfolio at that moment would be very beneficial to Mutual fund Investors.

Geo- political relations are another area of growing concern. Let us pray, the world does not recede to chaos. The Middle East which supplies energy and oil to the rest of the world continues to do so without major disruption. It is especially important in Indian context, where countries have rising populations and elevated energy needs with acute shortage of domestic energy. Such aberration from normal conditions can always bring uneven and unparalleled change in Bond Yield.  Those who track and invest in Bond Security directly certainly need to factor it beforehand. But if you are a Mutual fund debt investor, at least Fund managers use their expertise timely to ward off such surprises.

Yet it is important to mention, the recent poor experience of Debt fund managers from a couple of Mutual Fund houses like Templton, UTI, Nippon etc has contradicted this optimism and have caused serious breach of trust of debt investors. We expect the Trustees in Mutual Fund would prevail upon from their routine slackness and sloth to see the Investor trust and investment is protected from human vagaries. Templton case is sub-judice at Supreme Court and honorable reparation is a genuine demand of Investors over there.  We will bring you an adequate commentary on the development soon.

When Equity Portfolio and Balanced Portfolio of Mutual funds are valued at its highest level these days, investors who had invested in downturn or continued to hold during turmoil must be enjoying the fruit of their discipline and trust.  Needless to say onward investment in Equity needs even more discipline. Revisit your financial portfolio. Take help of NISM certified professional advisors who are engaged in investment consultancy business. It would be a great Journey if Investors tread cautiously at this level.

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