Skip to main content

What are Gilt Mutual Funds?

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)
 

What are Gilt Fund?

The term 'Gilt' originated to connote British government certifications that had gilded edges. Gilt funds going forward were defined as mutual funds that predominantly invest in government securities (G-Secs). These funds are ideal for retail investors as they allow them an opportunity to directly invest in Government papers, which otherwise are dominated by institutional investors. The basic purpose of investing in Gilt funds is to generate returns at negligible risk as it is highly unlikely that the government will default on the debt raised by it.

Returns from Gilt funds are highly dependent on the change in interest rates as there is an inverse relationship between bond prices and interest rates. Hence, when the interest rate falls, prices of government securities go up, benefiting the performance of Gilt funds and vice versa. Government securities include central government dated securities, state government securities and treasury bills.

Performance Gyrations

 

Since 2009 the returns on these funds have been far from impressive. Around 2009, stocks begun recovering, and there were more lucrative assets to which investors flocked albeit to assets with greater risk. A look at the performance table clearly brings out the gyration in annual returns delivered by Gilt funds. After delivering double digit returns of 27.50% in 2008, the average long term Gilt fund actually delivered a loss to its investors in 2009. However, at the end of 2012 the category average stood at 10.21%. This is because the Reserve Bank of India (RBI), the country's central bank, which since 2010 had been relentlessly raising interest rates owing to rising inflation, has done an about turn, triggering off the process of slashing rates. Since April 2012, the Reserve Bank of India has cut interest rates by 100 bps. Moreover, to improve the liquidity condition, the central bank has reduced the Cash Reserve Ratio by 150 bps to 4.00% from 5.50% in January 2012. Year to date (as on April 29, 2013), the average Gilt fund delivered 13.83% simple annualized return.

Gilt funds witnessed appreciation in their net asset value as the interest rate cycle has already peaked and rates are coming down, as a result investors are lured to invest in Gilt funds. This is evident by the corpus mopped up by Gilt funds over the last six months. The Assets under Management (AUM) in these schemes increased to Rs. 8,074 crore in March 2013 from Rs. 3,356 crore in September 2012.

Risk

Before committing your money it is imperative for an investor to be absolutely clear about the risks associated with the investment. While it is true that risk in government securities is minimal, there is always the risk of interest rates changing in the economy. When interest rates move up, the price of a bond moves down. Apart from this there are other factors that can push bond prices down. As a lay investor one could keep a look out for certain key indicators to follow the trends in Gilt funds. Cash Reserve Ratio (CRR) and Repurchase rate (Repo) are the most commonly mentioned terms, an increase in either one would bring bond prices down and vice-versa. Bond prices are also sensitive to inflation as the central bank is likely to increase the CRR and Repo lest inflation should spiral out of control. Higher inflation is viewed as a negative and can pull bond prices lower. Apart from this, an increase in government borrowing is also not welcome by traders, off late an increase in government borrowings has been a big dampener to investor confidence. Call rates which are an indicator of short term liquidity in the market again influence bond prices indirectly, if call rates are increasing, traders and banks are likely to sell government securities held by them, triggering a drop in prices. Also instead of bond prices you will find references to the 'yield' of a particular instrument, when bond prices fall the yields increase and vice-versa.

While most economic advisors and experts believe that the central bank will continue reducing interest rates during 2013, a spike in inflation could de-rail such rate reductions. Hence investors who have committed their money to Gilt funds, should keenly watch out for the direction that inflation rates take.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

Surrender ULPPs

  ICICI Pru LifeTime and ICICI Pru Lifestage are Unit Linked Pension Plans. Such insurance linked retirement plans are neither good investments nor do they offer sufficient insurance cover. As you can see, these have turned out to be bad deals. In the Lifetime plan, the fund value is not even equal to the total premiums that you have paid and in the Lifestage plan your return is just about 6% which is quite low. The mortality charges are as per your age which is why they have increased. Moreover, once these plans matures, you will have to compulsorily opt for annuity (regular income) and the annuity rates are generally modest. Assuming these plans mature in the next one year, it will be wise to surrender the plan now and curb your future commitments.   Before you choose to buy a term plan, you have to consider a few points. You need to insure yourself, only during the time you are working and your family is financially dependent on you. At the age of 59, not all insurance companies w...
Read more

ICICI Pru Constant Maturity Gilt dividend

Invest ICICI Prudential Constant Maturity Gilt Fund Online ICICI Prudential Mutual Fund   has announced dividend under the following schemes: Scheme Dividend ( R /unit) ICICI Pru Constant Maturity Gilt-DQ 0.26543239 ICICI Pru Constant Maturity Gilt Direct-DQ 0.27171609 ICICI Pru Q Interval Plan I-D 0.10617296 ICICI Pru Q Interval Plan I Direct-D 0.10703967 ICICI Pru Q Interval Plan I Ret-D 0.10617296             The record date has been fixed as June 13, 2016.   ----------------------------------------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in india for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Franklin India TaxShield 4. ICICI Prudential Long Term Equity Fund 5. IDFC Tax Advantage (ELSS) Fund 6. Birla Sun Life Tax Relief 96 7. DSP BlackRock Tax Saver Fund 8. Reliance Tax Saver (ELSS) ...
Read more

NPS Investment Choice for Safe Investors

Invest NPS Online       Whether they invested through SIPs or put in a lump sum amount, risk-averse individ uals have earned the highest returns. These are investors who stayed away from stocks and divided their NPS corpus between G class gilt funds and C class corporate debt funds. On average, gilt funds have given 9.75% annualised returns while corporate debt funds have churned out more than 11% in the past five years. As a result, the average return for ultra-safe investors in the past five years is in double digits. Even in the short term, ultrasafe investors have been the biggest gainers among NPS investors. Will the good times continue? The gilt funds of NPS are holding long-term bonds with an average maturity of over 19 years and a modified duration of about 9 years.These funds have done well because interest rate cuts have pushed down bond yields. But experts say this trend will not stay forever. NPS is a long-term investment and the bonds are predominantly held to matu...
Read more

Buy Health Insurance Plan even if you are covered with my Employer

Buy Health Insurance Plan Online Yes, getting a private insurance cover now, which extends beyond your retirement age, is recommended There are a few reasons why buying a health insurance plan may make sense even though you get medical insurance from your employer. Here are the points you need to think about. Firstly, your employer's insurance coverage will only protect you as long as you are employed with the company. The policy will terminate when you quit the job or when you retire. Post retirement is perhaps the phase when one needs it the most but you won't have it then. Moreover, buying a new insurance policy after the age of 50 means that there will be no coverage for pre-existing diseases.   Lastly, health insurance policy you get from your employer may or may not cover your dependants. ------------------------------ ----------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver M...
Read more

SBI MAGNUM MIDCAP ONLINE

Invest SBI MAGNUM MIDCAP ONLINE   SBI MAGNUM MIDCAP fund didn't fare well in its initial years but, in recent years, has steadily improved its performance under the capable hands of its current fund manager. Although investing predominantly in mid-cap stocks, the average market capitalisation of its portfolio is lower than other category peers.   Although the stock selection approach is mostly bottom-up , the fund manager doesn't shy away from taking bold sector bets , as is reflected in its large exposure to the healthcare sector. She is equally adept at handling performance across market cycles--the fund has captured more of the upside during market upticks and contained the downside during downturns in a better manner than its peers.   Given its superior risk-reward equation, the fund is a worthy pick in its category.     ----------------------------------------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing EL...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now