The yield to maturity (YTM) of debt mutual fund (MF) schemes - an indication of future returns - has stabilised in the past couple of months after a steep rise between July and September 2022, a report by Business Standard said, citing Value Research data.
As per the report, fund managers and advisors believe though YTMs have steadied, their peak is still a few basis points away, especially for funds that have a longer horizon.
"YTMs have risen for some categories in the past couple of months while being stable for others. They can still go up but not much,” Parijat Agrawal, head-fixed income, Union Asset Management Company, was quoted as saying.
As of November-end, YTMs of all debt fund categories, except credit risk funds and overnight funds, were in a narrow range of 6.3 percent-7.3 percent, noted the report.
Given the expectations of a further rise in YTMs, fund managers, investment advisors and MF distributors are advising investors to stick to shorter-horizon funds, said the BS report. According to them, investments in longer-horizon funds like gilt can be put on hold for a few more months, it added.
"Till now, no funds with high-quality papers have touched a YTM of 8 percent. I am quite hopeful that it should happen in the next couple of quarters. Hence, I am recommending my investors to wait for a few more months before investing in medium-to-longer duration funds," said Rushabh Desai, founder of Rupee With Rushabh Investment Services.
Three schemes together – corporate bond funds, banking and PSU funds, and gilt funds – witnessed a net outflow of ₹73,400 crore in the first nine months of 2022, owing to the poor performance over the past year and the rate hike cycle, said the report.
Debt funds are still finding it hard to stem outflows, even as YTMs have risen to good levels and the rate hike is close to getting over, it pointed out. In October, investors withdrew a net of ₹2,900 crore from these three funds and made a net investment of ₹1,800 crore in November, added the report.