Softer rates: boon for star rated Gilt Funds that have already given close to 6% returns over the last month

Fixed income securities as an asset class is different from equities, and the reasons for which the bond prices go up or down are varied from those that explain for the equities.

For bond investing the logic is simple – “Bond prices are inversely proportional to the interest rates”. With interest rates almost expected to be lower in coming days, the bond prices can only go higher in coming quarters. Yes Bank has already announced a cut in its MCLR by 10-15 bps thus highlighting the trend.

Investors always have an option of investing in good quality Gilt Funds, which invest in government bonds.

Reliance Gilt Securities Fund; SBI Magnum Gilt Fund- long term plan; and L&T Gilt Fund are amongst the top three mutual fund schemes that have been strongly rated by various rating agencies and have been consistent performers.

These funds have delivered more than 18 per cent returns with the Reliance Gilt Securities Fund delivering 19.90 returns, best in the category over a one year period.

Over the past one month the performance for the funds have been in the range of 5 per cent to 5.82 per cent with L&T Gilt Fund being the best performer in the lot.

If we consider three months period the returns for the said funds have been in the range of 7.82 per cent to 8 per cent for Reliance Gilt Securities Fund and SBI Magnum Gilt Fund- long term plan. L&T Gilt Fund has delivered 7.86 per cent over the same period.