Investors can expect 5% or higher tax free return in a time horizon of three and a half years. This is billed as an opportunity to earn higher interest income when traditional domestic rates are at record lows.
“We are operating in a benign interest rate environment – with large output gaps in the economy; it is most likely that inflation will come down from current levels,” said Sandeep Bagla, CEO at Trust Asset Management. “Banking and public sector companies are safe investment options and will benefit from the growth revival. This prompted us to launch this new fund offer beginning our asset management journey.”
The fund has imbibed a set of parameters as validated by Crisil. These envisage investments in triple-A rated bonds only with stable outlook. Even issuing companies should not have any rating change in the past two years. The filters applied by TRUST MF aim to make the portfolio safer for investors amid uncertain time.
Some of those companies that could be included are Power Finance Corp, National Highway Authority of India (NHAI), NTPC, Indian Railways Finance Corp, HDFC Bank, SBI, Kotak Mahindra Bank, and ICICI Bank.
The fund will track the Crisil Banking and PSU Debt index.
Investors can have indexation benefits too if they hold units beyond three and a half years, which in turn will result high post tax returns. Anand Nevedia, who has been working with the Trust Group over 17 years, is the fund manager for the proposed fund.
“Bank fixed deposits and savings schemes are now yielding low returns, and the low interest rate environment could continue for a while,” said Bagla.
Banking and PSU mutual fund schemes of late gained momentum as this category obtained the fourth largest investor inflows last year.
However, the risk to the fund remains in changes to the interest rate cycle, leading to increase in bank deposit or other savings rates. Even post office rates are also trending low now. If all those sovereign-backed rates rise suddenly, investors may exit mutual fund debt schemes.
“If you are depending on fixed income returns, it is time to shift to mutual fund debt schemes for now. But you need to be choosy with professional advice,” said a senior bank treasury official.
