2024-03-16 16:05:20
Mumbai: At present, there are signs of decline in inflation in economies around the world. Along with this, there is now every possibility that the Central Bank may also cut interest rates. The first signal of this has come from the US Federal Reserve, which may start cutting interest rates in early June. The European Central Bank can also take such a step. Along with this, our Reserve Bank is also keeping a close watch on the situation. It is possible that a similar decision may be taken in India also.
Corporate bond returns are increasing
Seeing the signs of increase in interest rates, investors have again started showing their interest towards corporate bond funds. This is because returns from corporate bonds increase against the backdrop of falling interest rates. However, the indexation benefit applicable to these funds has been abolished. Yet these funds are still popular because they come with the advantage of rising interest rates and low-cost ratio.
Investment is made in government securities
Corporate bond funds are debt funds that invest in corporate bonds and government securities rated AA+ and above. An example of this is Nippon India Corporate Bond Fund which is giving annual returns of more than 8%. The returns are much higher than the average for this category. The interest rates offered by corporate bonds are directly affected by other interest rate changes, because bond prices and interest rates are inversely proportional to each other.
good returns in one year
Dwaipayan Bose, co-founder of Advisor Khoj, says corporate bond funds have performed well in the last one year. Nippon India Corporate Bond Fund has given the best performance of 8.39%, while almost half of the total funds in this category have given returns of more than 8%. These include Axis Corporate Debt Fund, HDFC Corporate Bond Fund and Baroda BNP Paribas, HSBC and Aditya Birla Sun Life.
security with returns
Corporate bond mutual funds are ideal for risk-averse investors looking for high returns on investment as they are debt instruments and ensure safety of capital. The tenure of top corporate bond funds generally ranges between 1 to 4 years, which allows investors to maintain their liquidity. In addition to offering high returns, corporate bond funds can be bought and sold at any time, allowing investors to withdraw cash when they need it. Furthermore, most financial advisors recommend these funds to build a diversified, balanced portfolio.