Time for a gilt trip?

Many experts believe that interest rates have peaked and may soon see a rate cut by the RBI (Reserve Bank of India). If that does happen, gilt funds are all set to appear attractive. Here's why: A change in interest rate has an inverse relationship with debt fund returns, especially those that invest in bonds with a medium to long duration. When the RBI hikes interest rates, the returns of such funds tend to decrease, and when interest rates fall, their returns typically increase. This happens because when the RBI lowers interest rates, the interest rate offered on new bonds are lower. So, the existing bonds that were issued earlier end up paying more interest and become more valuable. As a result, the price of th