Out of every ₹100 invested, ₹80 will be invested in the bonds of the issuer (in this case InCred Financial). This will protect the capital. The rest of the ₹20 will be invested in Nifty call options - an equity derivative that bets on Nifty rising in value.
Devang Shah of Axis Mutual Fund predicts a structural shift in demand-supply dynamics for Government bonds in 2024-25, driven by Index inclusion, FPI buying, and lower gross borrowing. He expects RBI to ease liquidity, cut rates, and lower yields. Investors can consider adding duration to their portfolios in fixed-income funds.
Fixed deposit investors should be prepared for a downward trend in interest rates. The 10-year government bond yield has already fallen and is expected to continue decreasing. Whenever interest rate starts falling, the short to medium-term FD rates will be affected first, so investors should consider booking their FDs soon.
From a fixed income point of view, vote on account laid the path of fiscal glide path and that resulted into about 10-15 basis point of yield movement downwards.
Marzban Irani, CIO of LIC Mutual Fund Asset Management, discusses the growth of the mutual fund industry, with a focus on the increase in equity inflows and the crossing of the 50 trillion mark in Average Assets Under Management (AAUM). He predicts that inflows will continue to rise, particularly as investors take tactical calls. The industry is also seeing penetration into small towns, driven by awareness campaigns. Irani expects this year to be favorable for debt instruments due to expected interest rate declines.
The Indian equity market is becoming a retail-driven market with growing interest from retail investors due to the financialisation of Indian savings. The debt market is also seeing increased retail and HNI interest in fixed-income instruments. Managed investments via mutual funds, insurance, and portfolio management services have grown significantly in the last five years.
Nirav Karkera says: “There is a lot of new to mutual fund money coming in at this point in time. It is not just the category rotation that is happening but there are also fresh SIPs outside the industry that are moving into the industry at this point in time. It will be a very good push towards the flows in these specific categories, small and midcap very specifically.”
Debt mutual funds are schemes that invest in a mix of instruments such as corporate/government bonds, corporate debt securities and money market instruments. Depending on the scheme, the portfolio can have one of the above securities or a mix of them.
Kalpen Parekh says: “Election is not a matter of worry. If something is a matter of worry, it is global geopolitical issues and how global flows move because we are more expensive than some of the other EMs. If flows turn, it could be a matter of worry and that can lead to intermittent volatility of 10 to 20% which happens every 18 months or two years election or no election.”
Online brokerage Public, wealth management platform Wealthfront and fintech software company Apex Fintech Solutions are among the firms launching new products that aim to make it easier and more affordable for individual investors to gain exposure to fixed-income products like Treasuries and corporate bonds
While an easing interest rate environment is seen propping up prices of the yellow metal, double-digit returns like those in 2022 and 2023 are unlikely, especially at the current levels, they said, advising investors to stagger purchases.
The year-t-date total return for the Morningstar US Core Bond TR USD index, which tracks U.S. dollar-denominated securities with maturities greater than one year, was 5.47% as of this week, up from about minus 13% last year.
As bonds emerge from a historic selloff, some investors expect better times in the U.S. fixed income market next year - as long as the Federal Reserve's rate cuts play out as anticipated.
"Technology, especially through robo-advisory platforms, has significantly shaped the development of Indian markets across asset classes. It contributes by using advanced algorithms for data analysis, pattern recognition, and algorithmic trading, enabling the creation and execution of complex trading strategies with precision. Additionally, robo advisors excel in risk management through sophisticated algorithms, operate 24/7 for continuous market monitoring, and can even incorporate behavioral analysis for a deeper understanding of market dynamics."
"As the market exuberance gradually subsides and valuations again realign with underlying fundamentals, largecaps offer a relatively better margin of safety. However, it is essential to note that from a mutual fund (MF) perspective, the decision to book profits and realign the portfolio carries the potential for increased portfolio churn."
Maybe if you don't have a recession, the Fed might cut once a quarter. If they see a recession, they will cut faster, but without a recession, they might cut once a quarter. But I don't think the Fed will take rates all the way down to 2.5%. There's no reason to do that.
The platform provides investors the opportunity to enter the bond market with investments as low as Rs 1,000, offering yields ranging from 9% to 14% for bonds rated in the investment-grade category, the company said.
“Since the OMO was not anticipated, in the near term, the bond markets can continue to remain a bit nervous. In the near short term, 10-year G-Sec will probably be at 7.25-7.45% levels and on a medium term, once we start seeing these flows coming back, next year, probably 24, once the Fed starts to pause and not hike incrementally, rates will start going lower.”
Yields on 30-year Treasuries rose above 5% for the first time since 2007 on Wednesday, pushing the yield up 15 basis points on the previous week and rattling investors.
Although I will not be able to make comment, especially to our stocks or in general from the equity market point of view. But I can only talk about the AMC industry in general which continues to remain a core industry given the fact that financial saving in the country has been rising and more and more investors would prefer to invest their savings to the mutual funds as we move forward.
“The index inclusion process is a staggered process that starts from the middle of next year and ends by March ‘25. So, we will see flows coming into the markets over a period of time and it is a significant development from the perspective of ensuring that there is a new source of demand for government bonds.”
“Global growth is likely to be just about 2% or sub-2%, not just this year but probably next year despite the fact that the Fed has raised its outlook from about 1% to 1.5% for US GDP growth for next year. Even there, we should not take the Fed outlook at face value.”
The mid-cap and small-cap indices, which is proxy for the India growth story - probably a more accurate one than the large caps - have given returns of over 20% in the last six months against a mere 6% return in large caps, on the back of an impressive rally in capital goods, realty, PSUs and healthcare stocks. Further, a reasonably steep yield curve, even after interest-rate hikes of 250 basis points, is reflecting elevated inflation expectations, which is also backed by growth.
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