SBI Dynamic Bond is a good fixed income fund. You can continue investing in it, despite the recent losses...
05-Aug-2013 •Research Desk
I invested Rs 50,000 in SBI Dynamic Bond fund in June 2013, before the RBI order and subsequent fall in NAV. Will it be a good idea to make one more investment of Rs 50,000 at the lower NAV? I want to stay invested for more than 12 months.
In the last couple of weeks, Indian financial markets saw certain unexpected events- mass exodus of FIIs from debt market and then sudden increase in interest rates by RBI.
This lead to some abrupt losses in debt funds which are otherwise considered safe. Nobody can predict such events. Although these rate hikes are expected to be reversed but nobody knows when. But whenever it happens, debt investments and funds will gain.
SBI Dynamic bond is a good performing four-star rated fund. Over the past three-year period it has delivered an annualised return of 9.88 per cent against category's 7.82 per cent. You can continue with your current investments in the fund.
The prices of short-term bonds are near the bottom and therefore short-term yields have become attractive and are ranging between 9-10 per cent. Therefore, if you don’t need the money then stay invested for 1-2 years.
If liquidity is not important for your additional investments, you should opt for Fixed Maturity Plans (FMP) instead of dynamic bond funds. FMPs invest in debt papers with maturity similar to the scheme. Dynamic funds are likely to do better over longer tenure.