Income funds miss the bond rally

Yesterday the RBI Governor did not surprise investors by keeping the interest rates unchanged. However, he did change his stance that he's done with raising interest rates and he will be ready to lower the interest rates if there were signs of the accelerated easing of price pressures. This fueled a rally in bond prices but very few funds were geared to benefit from this.

Only six of the total 83 income funds had their average maturities above 10 years. The NAV of these funds went up by nearly half per cent yesterday. 26 income funds had their maturity between 5-10 years and they gain .36 per cent. More than half of the funds had their maturity between 1-5 years and they were up .21 per cent. Six funds had their portfolio like an ultra short term fund holding bonds of lower than 1 year maturity.

The Income funds have returned 4.44% in the last one year and interestingly the last 3-month return is 4% which indicates that a significant part has been generated in the last three monthly only.