Returns in debt funds come from two avenues. One, accrual which means the coupon or interest that accrues on the instruments in the portfolio. Two, prices of the bonds and/or other instruments that move up or down in the market. The accrual, which is accounted in the net asset value (NAV) every day, is a given. It happens without any conditionality; it happens irrespective of market conditions. It is the market movement that adds to it (if bond prices move higher) or takes away (if bond prices move lower) to the daily accrual in the portfolio.
Recap: 2021 And 2022
These two years were marked by yield levels in the market moving up. Bond yields and prices move inversely, and hence market-related components were impacted adversely. While the coupon accrual in the portfolio was very much there, down-tick in prices was taking away from the accrual. To recall the background why yields were moving up, it started from yields dropping significantly when the Reserve Bank of India (RBI) cut interest rates till 2020 to support the economy. From the very low levels, interest rates had to eventually move up. RBI's rate hike cycle started in May 2022. However, interest rates in the market started moving up from 2020-end. This was due to multiple reasons: high inflation, high fiscal deficit leading to borrowings from the market, and anticipation of rate hikes by RBI.
As an indication, the 10-year benchmark government bond yield was at a low of 5.82 per cent in December 2020, and it started inching up from that level since then. Even before the RBI rate hike cycle started in May 2022, it crossed 7 per cent in anticipation of rate hikes.
Recap: 2023
Denne historien er fra February 2024-utgaven av Outlook Money.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
Allerede abonnent ? Logg på
Denne historien er fra February 2024-utgaven av Outlook Money.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
Allerede abonnent? Logg på
Here's How To Claim Tax Refund If You Missed The ITR Deadline
The Income-tax Act, 1961, allows the refund of any excess income tax deducted on your income beyond your actual tax liability.
26 Spiels You Should Not Fall For
We have a list of 26 traps that you should avoid in your journey to creating wealth
Unified Pension Scheme
The Union Cabinet approved the Unified Pension Scheme (UPS) on August 24, 2024, guaranteeing 50 per cent of the salary as assured pension for central government employees.
Unlocking Financial Freedom with Freedom SIP: A Beginner's Guide
Freedom SIP is the smartest way to finance your retirement because it allows you to ride the compounding rocket to build wealth, even by investing a small monthly sum.
Asset Allocation Strategy to Safeguard Against Market Fluctuations
Invest in different asset classes, such as equities, debt, gold, etc., so that if a particular segment doesn't perform in a given situation, others will come to the rescue.
The Role of Asset Allocation in Investing
A proper mix of asset allocation that aligns with investor's goals is key to the portfolio's long-term performance and reaching milestones.
Why Retirement Planning is Crucial in Life
Retirement planning is the key if you want a financially secure life in your sunset years.
IS SENIOR HOUSING FOR YOU?
Many seniors have taken refuge in senior living facilities in their twilight years as their children have moved abroad. While that may help them ward off boredom, they often come at a huge cost
WITH OR WITHOUT INDEXATION: WHEN DO HOMEOWNERS PAY LESS?
Calculating taxes under both methods-considering inflation and property appreciation-can yield a more precise result
Flexing Its Way Across Market Cycles
Very few funds meet investors' expectations of delivering superior returns across market cycles, and HDFC Flexi Cap Fund is one of them.