In February 2021 (for which the latest data is available at the time of writing this story) these funds saw inflows worth ~2,005.8 crore. Let us understand how these funds work and their pros and cons before we decide to invest in them.
The current environment
At present, an economic recovery is underway. At the same time, prices of a wide range of commodities, including crude oil, have shot up. This is leading to higher inflation. Bonds yields are moving up. There is fear that if inflation is very strong, it may force central banks to abandon their pro-growth, accommodative monetary stance. Central banks may then have to hike interest rates to rein in inflation. This would be negative for the equity markets.
Valuations within the Indian equity market are also not inexpensive. That, too, is causing anxiety among investors.
At the same time, a lot of investors are positive about the economic recovery and the expected recovery in corporate earnings. They expect earnings growth to drive the equity markets forward in the future.
Thus, a tug of war is on within the equity markets between the bulls and the bears. There is no certainty about whether the markets will move further up or correct. This is responsible for the volatility we are witnessing periodically.
In such an environment, many investors may like to invest in a type of fund that follows a model-driven approach towards allocating to equities and debt.
How do BAF/DAA funds work?
This story is from the April 2021 edition of Investors India.
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This story is from the April 2021 edition of Investors India.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
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