Investors put money in debt mutual funds to get stable returns. The return on a debt portfolio is broken into two parts: the income which is the coupon/yield to maturity (YTM) of the underlying securities in the portfolio, and the price appreciation of securities in the portfolio. Analysing the total returns over a longer time frame, 80-85 per cent of returns is generated by YTM of the portfolio and the balance 15-20 per cent by capital appreciation. In the past, retail and HNI investors have always been inclined towards schemes that offered higher YTM. YTM is the stable part of the returns of the portfolio. The risk of a high-quality portfolio is volatility, as the underlying securities are traded frequently. However, we are seeing a shift of retail and HNI investors from credit funds to good quality portfolios this financial year. Lower GDP growth and high leverage of Indian companies have led to credit quality deterioration and security prices moving down/marked down in a portfolio. It is because of this that the returns of high yielding portfolios have not matched the YTM of the portfolio. Yields on government securities and ‘AAA’-rated PSU papers have come down due to RBI cutting… Read full this story
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Debt market’s love for G-Secs & PSU papers is here to stay have 312 words, post on economictimes.indiatimes.com at May 29, 2020. This is cached page on Vietnam Colors. If you want remove this page, please contact us.