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Business Standard
3 days ago
- Business
- Business Standard
Funds flexing 60/40 playbook becoming investor favourites in India
The growing demand for hybrid funds may indicate the huge popularity of equity investments is starting to wane in the world's most populous economy Bloomberg Indian funds that offer built-in diversification by combining stocks with assets such as bonds and gold lured in more money than pure equity ones last month for the first time in a year, pointing toward a potential long-term investment shift. The so-called hybrid plans attracted a net ₹208 billion ($2.4 billion) of inflows in May, while stock funds garnered just ₹190 billion , according to data from the Association of Mutual Funds in India. The switch comes as global geopolitical turmoil escalates and Indian equities trail their worldwide peers amid concern over weaker earnings growth. 'Investors are taking a break and are hedging some of their assets into hybrid funds,' said Sailesh Jain, who oversees more than $4 billion as a money manager at Tata Asset Management Pvt in Mumbai. 'These funds are a perfect mix during such uncertain times as they offer growth potential by staggering equity investments and generate income through debt investments.' Potential buyers are also shying away from Indian shares as they appear pricey based on valuation metrics, while interest in pure bond funds has been damped by the diminishing prospect of future central bank interest-rate cuts, Jain said. The two most popular categories of hybrid funds in May were multi-asset and arbitrage schemes. The former must have investments in at least three asset classes with a minimum allocation of at least 10 per cent in each, according to the market regulator's guidelines. The latter must have a minimum of 65 per cent in equities or equity-related products, and a maximum of 35 per cent in debt. One of the advantages of hybrid funds is their tax efficiency. Arbitrage funds that invest both in stocks and bonds are taxed at the same rate as stocks, even though they offer exposure to debt. Pure bond funds, on the other hand, are taxed at a higher rate. Multi-asset funds that invest in precious metals such as gold have also lured in higher inflows due to the record-breaking rally in bullion. Such funds saw their assets under management climb to an all-time high of 1.2 trillion rupees at the end of May, based on data from the mutual fund association. The performance of Indian stocks has started to improve in recent months, with the MSCI India gauge climbing about 16 per cent from a one-year low set in February. At the same time, recent threats such as rising global trade frictions and geopolitical conflicts still argue for diversification. 'Given persistent geopolitical headwinds, hybrid funds may offer better risk-reward notably in the context of India's expensive valuations and sluggish earnings growth,' said Nitin Chanduka, a strategist at Bloomberg Intelligence in Singapore.
Time of India
3 days ago
- Business
- Time of India
Funds flexing 60/40 playbook become investor favorites in India
Indian hybrid funds, blending stocks with assets like bonds and gold, have outpaced pure equity funds in attracting investments for the first time in a year, signaling a potential investment trend. In May, these hybrid plans garnered 208 billion rupees, exceeding the 190 billion rupees drawn by stock funds. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Indian funds that offer built-in diversification by combining stocks with assets such as bonds and gold lured in more money than pure equity ones last month for the first time in a year, pointing toward a potential long-term investment so-called hybrid plans attracted a net 208 billion rupees ($2.4 billion) of inflows in May, while stock funds garnered just 190 billion rupees, according to data from the Association of Mutual Funds in India. The switch comes as global geopolitical turmoil escalates and Indian equities trail their worldwide peers amid concern over weaker earnings growth.'Investors are taking a break and are hedging some of their assets into hybrid funds ,' said Sailesh Jain, who oversees more than $4 billion as a money manager at Tata Asset Management Pvt in Mumbai. 'These funds are a perfect mix during such uncertain times as they offer growth potential by staggering equity investments and generate income through debt investments.'Potential buyers are also shying away from Indian shares as they appear pricey based on valuation metrics, while interest in pure bond funds has been damped by the diminishing prospect of future central bank interest-rate cuts, Jain growing demand for hybrid funds may indicate the huge popularity of equity investments is starting to wane in the world's most populous economy. The flow of money from retail investors into the stock market has been one of the drivers helping the MSCI India Index deliver average gains of almost 15% a year over the past six years, outpacing most of its global two most popular categories of hybrid funds in May were multi-asset and arbitrage schemes . The former must have investments in at least three asset classes with a minimum allocation of at least 10% in each, according to the market regulator's guidelines. The latter must have a minimum of 65% in equities or equity-related products, and a maximum of 35% in of the advantages of hybrid funds is their tax efficiency. Arbitrage funds that invest both in stocks and bonds are taxed at the same rate as stocks, even though they offer exposure to debt. Pure bond funds, on the other hand, are taxed at a higher rate. Multi-asset funds that invest in precious metals such as gold have also lured in higher inflows due to the record-breaking rally in bullion. Such funds saw their assets under management climb to an all-time high of 1.2 trillion rupees at the end of May, based on data from the mutual fund performance of Indian stocks has started to improve in recent months, with the MSCI India gauge climbing about 16% from a one-year low set in February. At the same time, recent threats such as rising global trade frictions and geopolitical conflicts still argue for diversification.'Given persistent geopolitical headwinds, hybrid funds may offer better risk-reward notably in the context of India's expensive valuations and sluggish earnings growth,' said Nitin Chanduka, a strategist at Bloomberg Intelligence in Singapore.
Mint
20-06-2025
- Business
- Mint
Be alert about...: Uday Kotak hails Indian savers' transformation into investors but cautions against THIS
Indian stock market: Billionaire banker Uday Kotak, the founder and director of Kotak Mahindra Bank, highlighted a key transformation underway in India's financial landscape: investors preferring equity markets over bank FDs. However, he also shared a word of caution amid the growing equity culture. Kotak, in a recent post on social media platform X, wrote, 'India's saver turns investor. Post Covid, mutual fund AUM share, mainly equity, has doubled to 31% of bank deposits.' This succinct statement encapsulates a significant shift in the mindset of Indian households — from parking money in traditional bank deposits to actively investing in capital markets, particularly through mutual funds. Before the COVID-19 pandemic, Indian households predominantly preferred safe instruments like fixed deposits for saving money. Equity investments were often seen as risky and suitable only for a small section of financially literate or affluent individuals. However, the post-pandemic era has marked a change in this conservative approach. The share of mutual fund assets under management (AUM), largely driven by equity funds, has now grown to 31% of total bank deposits — a stark contrast to pre-COVID levels, where the share was significantly lower. According to the data shared by Kotak, the mutual fund AUM as a proportion of bank deposits was 13% in FY15, which increased to 21% in FY21, and now stands at 31% as of May 2025. The latest data from Association of Mutual Funds in India (AMFI) showed that the total AUM of mutual funds stood at ₹ 71.93 lakh crore in May, registering a 3% growth from ₹ 69.73 lakh crore in April. The pandemic prompted many individuals to reassess their financial planning, creating a stronger awareness of the importance of long-term wealth creation. With fixed deposit returns remaining relatively low and inflation impacting real returns, more people began exploring mutual funds for better yields. The rise of user-friendly investment platforms also made mutual fund investing more accessible to the masses, especially young investors. Another major contributor to this shift has been the widespread adoption of Systematic Investment Plans (SIPs). AMFI data showed that the monthly inflow into mutual funds through the SIP route rose by 0.21% to a fresh high of ₹ 26,688 crore in May. Additionally, the number of contributing SIP accounts in May rose to 8.56 crore against 8.38 crore in the previous month. The Indian stock market has witnessed a remarkable rally since the lows of the COVID-19 pandemic. Over the past five years, the benchmark Sensex has surged by 137%, while the Nifty 50 has advanced 145%. Broader markets have significantly outperformed the frontline indices during this period. The Nifty Smallcap 100 and Nifty Midcap 100 indices have each delivered nearly 300% returns over the last five years, underscoring the growing participation and interest in mid- and small-cap segments. While celebrating the shift from saving to investing and the impressive returns across market segments, Uday Kotak offers a timely caution: 'But let's be alert about excessive exuberance.' This serves as a prudent reminder that rapid market gains can often lead to over-optimism and speculative behavior. As valuations soar and investor participation widens, there is a risk of complacency or irrational expectations setting in. Kotak's message underscores the importance of maintaining financial discipline, focusing on fundamentals, and being mindful of potential market corrections — especially in an environment where sentiment can shift swiftly. Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Business Standard
19-06-2025
- Business
- Business Standard
Corporate bond funds: Assess portfolio quality, expense ratio before entry
Corporate bond funds (CBFs) attracted ₹11,983 crore in net inflows in May, the highest among debt fund categories, according to data from the Association of Mutual Funds in India (Amfi). These funds invest in corporate bonds rated AAA and AA+, and hence carry low credit risk. 'The surge in investor interest in CBFs, leading to high inflows in May, is probably driven by relatively attractive yields compared to government securities, making high-rated bonds appealing. Ample system liquidity from the Reserve Bank of India (RBI) operations has also encouraged investment,' says Devang Shah, head – fixed income, Axis Mutual Fund. Low default risk CBFs are regarded as low-risk investments. According to Crisil Ratings' Default and Rating Transition Study (covering FY14–24), no AAA-rated issuer has defaulted over any three-year period. The likelihood of a AAA-rated bond avoiding a downgrade over the next one year stands at 98.83 per cent. 'CBFs invest a minimum 80 per cent in AA+ and above-rated corporate bonds. They offer lucrative yields over government securities with minimal credit risk,' says Sandeep Bagla, chief executive officer, TRUST Mutual Fund. Competitive performance CBFs have delivered attractive category average returns of 9.5 per cent over the past year. 'CBFs offer higher potential returns than traditional saving instruments, portfolio diversification, lower risk, professional management, and better liquidity than direct bond investments,' says Shah. 'The repo rate cuts and liquidity infusion have contributed towards the performance of these funds,' says Deepak Agrawal, chief investment officer – debt, Kotak Mutual Fund. As of May 30, 2025, 21 CBFs together managed ₹1.95 trillion in assets. Rate cuts drive gains Decline in yields, in anticipation of RBI's rate cut cycle, boosted returns over the past year. Since February 2025, the RBI has cut the repo rate and cash reserve ratio (CRR) by 100 basis points each. 'Yields have declined sharply following RBI's 100-basis point repo rate cut and liquidity infusion, boosting returns on corporate bonds,' says Bagla. Returns may moderate With limited scope for further rate cuts, investors should temper return expectations. 'Investors should primarily anticipate stable accrual income rather than significant capital appreciation from large rate cuts,' says Shah. The average yield to maturity of this category has come down to 6.88 per cent. Assess portfolio Investors must pay attention to the risks associated with these funds. 'Corporate bonds carry elements of credit and liquidity risk. While the probability of credit loss is slim, it exists, though the diversified portfolio does mitigate the impact,' says Agrawal. Due diligence remains essential. 'Even within the AA+/AAA bracket, some instruments can carry materially higher default or liquidity risk than peers with a similar rating, making careful portfolio-level assessment essential,' says Bagla. Agrawal suggests that investors match their investment horizon with the average maturity of the funds to mitigate the relative liquidity risk. Investors should also review the expense ratio before investing. Suitable for conservative investors These funds are well-suited for conservative investors. 'Conservative investors seeking stable income and individuals with a medium-term horizon could consider these funds. An allocation of 20–40 per cent to debt, including CBFs, could be considered, adjusted according to individual risk. An ideal holding period is at least 2–3 years, and preferably longer,' says Shah.
Time of India
18-06-2025
- Business
- Time of India
Money market funds outshine liquid & overnight funds in May. Time to rethink emergency fund strategy?
Live Events In May, mutual fund investors showed a shift in their preference within the short-term categories as liquid and overnight funds experienced net outflows whereas money market funds attracted fresh inflows According to the latest data by Association of Mutual Funds in India ( AMFI ), money market funds attracted the second highest inflows within 16-sub categories in debt mutual funds and attracted an inflow of Rs 11,223 crore in May. On the other hand, liquid funds witnessed the largest outflows of Rs 40,205 crore and overnight funds saw an outflow of Rs 8,120 crore in the same expert attributes this shift to strong macroeconomic environment and stability in repo rates as in the last policy meet, the apex bank did a 50 basis point cut in the repo rate and changed its stance from accommodative to the post-meeting conference the RBI governor clearly mentioned that the change in stance shows the RBI's approach of taking decisions based on the data that will come regarding growth and inflation and there was also a change in stance that indicated that we may well be currently at the end of the rate-cutting cycle, the expert said.'Given the strong macroeconomic environment and stability in repo rates, going ahead, investors will focus more on high yields. Currently, the top Money market funds on average are providing 25 bps to 70 bps higher yields than liquid and overnight funds, respectively. Since these funds are categorized as park money for the short term, the higher yields provided by Money market funds make them more attractive,' Vishal Dhawan, CEO, Plan Ahead Wealth Advisors, a wealth management firm in Mumbai shared with generally consider overnight and liquid funds as an option for parking idle savings outside the world of banking. For a savings account alternative, safety and liquidity must take priority over anything else and liquid funds and overnight funds come closest to satisfying these liquid and overnight funds, if an investor redeems money on a Friday, even as they will get their money on Monday, the net asset value (NAV) applicable will be of Sunday which is because in liquid and overnight funds, NAV is declared for every day, including with the given flow, the important thing to know is should one review the emergency fund parked in liquid or overnight funds? In response to this, the expert firmly says that Yes, reviewing these funds on a periodic basis is necessary, given the changes in the macro environment and personal events of the investor as certain important factors like investors' cash flow, interest rate cycle, and short-term requirements are vital for reviewing these funds.'If investors are expected to have a consistent cash inflow with no ultra short-term cash requirement and an overfunded emergency fund in a stable interest rate environment, they can tactically plan to change the allocation of funds from low-yielding liquid or overnight funds to money market funds. However, if their emergency funds are not funded enough, liquid or overnight funds are preferred,' Dhawan told Governor in his policy statement mentioned that inflation has softened significantly over the last six months from above the tolerance band in October 2024 to well below the target with signs of a broad-based moderation.'The near-term and medium-term outlook now gives us the confidence of not only a durable alignment of headline inflation with the target of 4 per cent, as exuded in the last meeting but also the belief that during the year, it is likely to undershoot the target at the margin,' the governor with RBI estimating its inflation expectation for FY26 to be less than its target of 4%, the current interest rate cut and tax benefits provided in the union budget should support growth, unless there are some significant global events that slow growth or increase inflation, Dhawan said.'Given, we may be at the end of the interest rate cut cycle, we can expect a stable interest rate environment going ahead. Money Market Funds do provide healthier yields than liquid and overnight funds at the current juncture. Hence, money market funds can be looked upon by investors who want to park excess funds for the short term, as they provide a good real return with lower credit risk,' Dhawan advised the with such category level shifts in inflows and outflows, reviewing debt fund allocation between once a quarter and half year should be good enough for investors, Dhawan further to the Sebi mandate, overnight funds invest in overnight securities having maturity of one day and liquid funds invest in debt and money market securities with maturity of upto 91 days only. On the other hand, money market funds invest in money market instruments having maturity up to one should always invest based on their risk appetite, investment horizon, and goals.: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@ alongwith your age, risk profile, and Twitter handle.
