Nippon India Mutual Fund launched the Nippon India Nifty SDL Plus G-Sec - Jun 2028 Maturity 70:30 Index Fund on November 07, 2022. The offer will close on November 18, 2022. This open-ended target maturity index fund will invest in the constituents of the Nifty SDL Plus G-Sec Jun 2028 70:30 Index which has a comparatively higher interest rate and comes with a relatively low credit risk.
As evident from its name, the scheme aims to earn returns corresponding to the total returns of the securities as represented by the Nifty SDL Plus G-Sec Jun 2028 70:30 Index before returns. Per the fund offer document, this fund would be passively managed and rely on an investment approach designed to track the performance of the Nifty SDL Plus G-Sec Jun 2028 70:30 Index.
This scheme will invest 95-100 per cent of its assets under management in State Development Loans and government securities. The remaining amount, if any, would be parked in money market instruments and cash and cash equivalents.
Siddharth Deb and Vivek Sharma managing this fund will be following a “Buy and Hold” investment strategy, which means they would hold the securities till maturity or redeem them only when required.
Should you invest?
Explaining what kind of people must invest in this fund, Suresh Sadagopan, founder, Ladder7 Financial Advisories, says, “This is a good product for those who are risk averse, want decent risk-adjusted returns (due to long-term capital gains treatment), are willing to hold to maturity and are not looking for any returns till maturity.”
In this era of market corrections when so many mutual fund houses are launching their new fund offers (NFOs) in the actively managed funds domain, does it make sense to allocate a part of your earnings to this fund? Sadagopan advises, “Moving to debt instruments is a good idea at a tactical level to some extent. However, we do not suggest someone change their strategic asset allocation much as that would mean timing the market, which is difficult in the best of times.”
The threat of global recession is getting real. Does it make more sense to invest in debt funds now to tackle the ongoing market volatility?
Rajani Tandale, Product Head – Mutual Fund, 1finance.co.in says, “Due to the actions of the US and UK central banks, geopolitical threats, foreign capital flows, and corporate earnings reports, markets may continue to be volatile. For fixed-income investors, the recent increase in yields creates an intriguing investment opportunity. In addition, the SDL strategy offers a relatively higher yield compared to G-Secs and PSU AAA."
Tandale adds, "A rising interest rate scenario also favours investments in floating rate bonds as the spread over a six-month T-bill is attractive and would get further adjusted with rising yields. Since the majority of the rate hikes for the current cycle have already been made, we anticipate the RBI to slow the rate of hike in upcoming sessions. Overall debt becomes an attractive investment option for investors nevertheless one must take qualified advice before investing to align with your financial goals.”
The fund’s units are priced at ₹10 each during the NFO period. The minimum subscription amount is ₹1000 and in multiples of any amount, thereafter. You can park your money in this option via both the Regular and Direct plan options. Each plan offers the Growth and Income Distribution cum Capital Withdrawal (IDCW) option.