NAV of Equity Mutual Funds nosedived during last few weeks as stock markets are in correction mode, more so in mid and small cap mutual funds. This sharp correction in stock markets, although not unusual, has rattled a lot of investors. Not only the equity market which saw correction, but the concerns surrounding  one of the big infrastructure firm on credit risk,even the debt Mutual funds came under lot of pressure, especially the credit risk mutual funds having exposure to this company.

So while planning investments in the debt instruments through mutual funds, it would be prudent to analyse the credit risk associated with it by looking into the investment pattern of the respective mutual fund  scheme. Debt  mutual funds having  more of  their  investments in  Government  Sovereign  Bonds (Treasury Bills) , AAA rated  Commercial Papers, other money market instruments,Fixed deposits of financially sound State owned and Private companies may give slightly less returns but actually provide very good risk protection to the invested capital.

In the current scenario where the interest rates are north bound and the bond yields are going up, short term / liquid / accrual debt mutual funds with quality holdings  are good options.



Subscribe to our Newsletter