At present, bond yields have risen, putting the bond market in focus once again. In such a situation, the question is arising about what mutual fund investors should do after the budget.
Mutual Fund Strategy After Budget 2022: Budget 2022 has focused on growth. The government has increased the fiscal expenditure. The focus of the government is on growth by increasing investment. Further capex is expected to increase. As the economic recovery continues, credit demand is expected to remain strong going forward. It is all in favor of the market. At present, bond yields have risen, putting the bond market in focus once again. In such a situation, the question is arising about what mutual fund investors should do after the budget. For example, what kind of balance should they do in equities and bonds. What are the better options in short duration or long duration bonds? Experts of the mutual fund market have given their opinion in this regard.
Strong movement in the bond market
Punit Paul, Head – Fixed Income, PGIM India Mutual Fund, says that there is a sharp movement in the bond market due to higher borrowing. Bond yields have risen higher than expected due to higher borrowing numbers. The 10-year benchmark bond yield has risen 15 bps to 6.83 per cent. The demand-supply gap may widen as it is possible that RBI will not conduct OMOs in view of the surplus liquidity in the system. At the same time, no time limit was given for inclusion of government securities in the global benchmark. Given that the rate cycle is changing with the RBI expected to raise interest rates in FY2023, the curve may remain flat and higher borrowings could see pressure on longer duration bonds. In such a situation, investors are advised to stay in short duration bonds (tenure of 1-3 years).
Why Choose Short Duration Bonds
AK Nigam, director of BPN Fincap, says that when it comes to the bond market, investors should invest money in short duration bonds now. Central banks around the world are indicating further tightening of monetary policy. In the US, interest rates may increase 3 to 4 times in the year 2022. In India also, the central bank can increase interest rates further. In this case, the 10-year bond yield will fall. For this reason, if you want to take advantage of the boom in the bond market now, then invest money in short duration bonds. Among them, bonds with maturity of 1 year can be better options.
time to time rebalancing
AK Nigam says that this is the time to do it in equity and debt. If equity market picks up, book profit and put in debt. Similarly, if there is a fall in equity, then shift some percentage of the debt towards equity. He says that the focus of the government is on infra and digital right now. In such a situation, if there are no funds investing in these two sectors in the portfolio, then include them. Funds investing in capital goods are also a better option.
What to do SIP Investor
If you invest money in mutual funds through Systematic Investment Plan (SIP), then continue it. If there is a fall in the market, increase the unit. Market outlook ahead is better. The way the economic recovery is, the market will accelerate. Equity allocation is based on risk profile and your age. Currently, largecap, large and midcap and multicap funds are looking better.
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