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Debt Funds Gain in 2009

The year was marked by volatility, but the debt segment of the mutual fund constellation managed to stay in the green

After the Reserve Bank of India (RBI) cut the then prevalent interest rates in 2008-2009 bond yields, rather than falling, went on to touch new highs under pressure from government borrowing. This in no way helped debt funds and, as a result, 2009 was not a year to remember for debt fund investors. Now, with inflation going up, up and away, and RBI reluctant to reduce interest rates, the combination is taking its toll on debt investors.

Low returns and high inflation is bound to dominate 2010 for debt funds, except for the promise that the Central bank would pull back interest rates to tame inflation. If that happens then there would be something for the investors to cheer about.

We track here the performance of debt funds for the month of December and the entire year (2009). The notable aspect of the various performances in the debt constellation is the achievement of monthly income plan (MIP) category, which beat the rest to emerge the best with a 14.37 per cent return.  


The end-of-the-year (December) performance of the category was impressive as all 57 funds stayed in the green. For the month, this category posted 0.28 per cent returns - it had garnered the same gain in November as well as in September. Sahara Liquid Variable Pricing managed to gain the maximum returns for December at 0.40 per cent.

Over the 12-month period (2009), its return stood at 4.47 per cent. The best-performing fund for the entire year was Escorts Liquid, posting a return of 7.38 per cent.

Floating Rate

The Long-Term Floating Rate funds continued to do better than their Short-Term counterparts, both for December as well as over the entire 12 months of 2009.

For December, Long-Term Floating Rate funds posted 0.39 per cent return, which was higher than their Short-Term counterparts, which posted a 0.34 per cent returns. 

For the whole of the year, the Long-Term Floating Rate funds posted an average return of 5.98 per cent in comparison to 5.16 per cent posted by the Short Term Floating Rate Funds.

Amongst the Short-Term Floating Rate funds, Escorts Floating Rate was not only the best performing fund for 2009 as its 1-year return climbed to 7.17 per cent, it also posted the highest returns of 0.46 per cent in December as well. 

Amongst the Long-Term Floating Rate funds, HDFC Floating Rate Income Long-Term remained the best-performing fund of 2009 after posting 1 year return of 8.38 per cent. For December, both ICICI Prudential LT Floating Rate A and Birla Sun Life Floating Rate LT , posted the highest returns of 0.52 per cent.

Liquid Plus and Short Term

Liquid Plus, beat the Short-Term funds in December. However, if one looks at the annual returns, the latter clocked better returns. While the Liquid Plus category posted 0.35 per cent return, more or less the same that it had done in November, the Short-Term category posted 0.26 per cent returns in December.

However, a long term view reveals that the Short-Term category has posted 6.44 per cent returns (1-year) while the Liquid Plus category had posted 5.42 per cent returns over the same period.

In the Liquid Plus category, Birla Sun Life Short-Term Opportunities Ret was the best-performing fund after it posted a return of 8.07 per cent (1-year). For December, it was Religare Credit Opportunities Retail that posted the highest returns at 0.46 per cent.

In the Short-Term category, it was Templeton India Short-term Income Ret which posted the highest yearly returns, surpassing the 10 per cent mark, to reach 11.95 per cent. Three other funds in this category also posted nearly ten per cent yearly returns.

For December, it was Bharti AXA Short Term Income Reg which posted the highest returns at 0.54 per cent. But out of a total of 27 funds in this category, two of them posted negative returns in December.

Medium Term

The category, which witnessed a rise in November after posting 0.94 per cent returns, slipped lower than even its October figures in December. In October it had posted 0.27 per cent return. But in December, its return figures were a sorry-looking 0.10 per cent. Its yearly return stood at 1.02 per cent.  

ICICI Prudential Income Opportunities Retail was the best-performing fund of 2009 as it posted annual returns of 9.30 per cent. For December alone, Fortis Bond Reg posted the highest returns at 2.58 per cent. However, out of a total of 60 funds in this category, 21 were in the red with ICICI Prudential Income Opportunities Retail giving the lowest returns at -1.32 per cent in December.


Being the most volatile of the debt category (Medium- and Long-Term) it failed to come out with any outstanding performance in December. Its returns fell further down from the 1.09 per cent that it had garnered in November and fell into the red to post -0.36 per cent return in December. The negative sentiment was spread over the year as even in its annual returns, this category stayed put in the red, at -7.10 per cent.

 The biggest fund in this category, ICICI Prudential Gilt Investment, posted negative annual return of 6.5 per cent while for December, it posted a 0.77 per cent return. But, the best fund in this category was Birla Sun Life GSF Long-term, which posted annual returns of 17.54 per cent.

 As far as Short term funds in this category were concerned, they managed to stay in the green, both for the month of December as well as entire 2009. For December, it posted a return of 0.12 per cent, while for the entire 2009, it posted 0.93 per cent. The best fund in this category was ICICI Prudential Gilt Treasury which posted 3.8 per cent annual returns while biggest fund Tata GSF Short Maturity posted negative annual returns to the tune of 2.21 per cent. HSBC Gilt posted the highest return in December at 0.72 per cent, while three out of a total of 17 funds in this category remained in the red for December.


This category continued to bring cheer to investors as it stayed in the green for both the month of December as well as the entire 2009, after posting 0.60 per cent and 14.37 per cent returns respectively. However, it had posted a negative 0.43 per cent in October when it broke its 7-month streak of positive returns. 

HDFC MIP Long-term, which is the biggest fund in this category, was also the best-performing fund of 2009 in the category after posting an annual return of 30.73 per cent. For December, this fund posted a return of 0.74 per cent. For the last month of the year, it was DSPBR Savings Manager Aggressive that posted the highest returns at 1.51 per cent. Out of the total 39 funds in this category, four posted negative returns.

Gold ETF

After touching all-time highs, this category went into the red in December, posting a negative 5.42 per cent. It had clocked a robust 10.78 per cent return in November. This comes after gold prices touched their peak this year in December at Rs 18,220/10 grammes.

The best fund in this category was Gold Benchmark ETF after it posted a 1-year return of 22.74 per cent. However, for December, all six funds in this category posted negative returns, with UTI Gold ETF falling the most at -5.39 per cent.

Debt Fund Performance
  Returns (%)  
Category  1 month  1 year
Hybrid: Monthly Income 0.60 14.37
Debt: Floating Rate Long-term Inst 0.48 6.77
Debt: Floating Rate Long-term 0.39 5.98
Debt: Liquid Plus Inst 0.38 5.65
Debt: Liquid Plus 0.35 5.42
Debt: Floating Rate Short-term 0.34 5.16
Debt: Ultra Short-term Institutional 0.32 5.09
Debt: Floating Rate Short-term Inst 0.31 4.78
Debt: Short-term Institutional 0.31 6.45
Debt: Speciality 0.29 5.85
Debt: Ultra Short-term 0.28 4.47
Debt: Short-term 0.26 6.44
Gilt: Short-term 0.12 0.93
Debt: Medium-term 0.10 1.02
Debt: Medium-term Institutional 0.04 -0.28
Gilt: Medium & Long-term -0.36 -7.10
Gold ETF -5.42 22.34
As on 31st December, 2009