Debt Mutual Funds

Investing in Gilts and Corporate Bonds is a good idea when you know that Interest rates would trend in a downward direction. The RBI has been cutting interest rates since the past few months. Though the interest rates have almost bottomed out, there exists a close to 400 basis points (4%) different between the corporate bonds and the Government Securities. This opens an opportunity to invest in Debt Mutual Funds.

Based upon the estimates of Financial Experts like Nouriel Roubini, the global economy could start to recover from the first half of 2010 onwards. Beginning of the next year would be a good time to start investing in equities. (Though, one can passively invest in equity now via SIPs). I plan to park some funds for a short term ( 1 year) in a debt fund comprising of AAA rated Corporate Bonds / Debentures.

Here is some information that I found useful regarding Debt Oriented Mutual Funds :

http://kayezad.blogspot.com/2009/01/good-time-to-invest-in-debt-funds.html

http://www.financialexpress.com/news/debt-funds/108298/3

http://www.thehindubusinessline.com/iw/2009/02/15/stories/2009021550290700.htm

Here are a few funds that I found interesting. I sorted the Short Term debt funds by their previous returns, then selected the following as they had majority of their portfolio in Corporate Bonds / Debentures

1] Kotak Bond Short-term-G

http://www.valueresearchonline.com/funds/portfoliovr.asp?schemecode=1313

35% bonds / debentures, Gilt - 48

2] ICICI Pru Short-term-G

Bonds + Debentures = 55 %

3] HDFC Short Term Plan-G

Debenture : 50 %

http://www.valueresearchonline.com/funds/portfoliovr.asp?schemecode=1237

4] HDFC HI Short-term-G

Debenture : 60 %

http://www.valueresearchonline.com/funds/portfoliovr.asp?schemecode=1204

5] Reliance Short-term-G

Non Convertible debentures : 61 %

http://www.valueresearchonline.com/funds/portfoliovr.asp?schemecode=1499