Debt mutual reserve investors cheer as their plans’ NAVs rose by upto 2% in a single day on September 1. Debt mutual funds saw a spike in their one day NAV as the yield on the administration 10-year bonds fell more than 17 basis points on Tuesday. The bond yields fell the most in a quarter of a year, after the Reserve Bank of India (RBI) announced measures to allay the market fears over rising yields and higher borrowing programs. Dynamic bond funds, gilt funds and long haul bond funds profited the most because of the fall in the bond yields.
On September 1, the 10-year bond yield was trading at 5.944%, its steepest decline since 13 May, from its past close of 6.117%. Bond yield and costs move in inverse ways.
Nippon India Nivesh Lakshya Fund saw the most elevated increase of 1.85% in its single day NAV as on Tuesday, trailed by SBI Dynamic Bond Fund and SBI Magnum Gilt Fund.
Bond yields and costs have an indirect relationship. As yields climb, costs of existing debt funds go down, as the new protections become more favorable because of higher interest rates. That means, the NAV of the debt mutual reserve plot falls when the yields of protections go up.
Here is the rundown of 10 debt mutual reserve plans which saw the maximum gain in their single day NAVs an on September 1.
- Nippon India Nivesh Lakshya Fund, 1.85%
- SBI Dynamic Bond Fund, 1.73%
- SBI Magnum Gilt Fund, 1.64%
- Kotak Gilt Investment, 1.59%
- Kotak Gilt Investment Provident Fund and Trust Plan, 1.59%
- UTI Gilt Fund, 1.58%
- ICICI Prudential Gilt Fund, 1.56%
- Tata Gilt Securities Fund, 1.54%
- Nippon India Dynamic Bond Fund, 1.51%
- DSP Government Securities Fund, 1.47%
Source: Value Research
Among its measures, RBI increased the held as far as possible from 19.5% to 22%. It also announced additional open market operations (OMO) worth ₹20,000 crore and term repo operations worth ₹1 trillion to infuse liquidity into the market.
In request to diminish the expense of funds for banks, RBI also allowed them to swap the funds raised under long haul repo operations (LTRO) at 5.15% with new funds made available under the 1 trillion repo window at 4%.