What 2024 Holds For Debt MFs

There are expectations that Reserve Bank of India (RBI) will cut interest rates in 2024, following the US and Euro zone rate cycle reversal Returns in debt funds come from two avenues. One, accrual which means the coupon or interest that accrues on the instruments in the portfolio. Two, prices of the bonds and/or other instruments that move up or down in the market. The accrual, which is accounted in the net asset value (NAV) every day, is a given. It happens without any conditionality; it happens irrespective of market conditions. It is the market movement that adds to it (if bond prices move higher) or takes away (if bond prices move lower) to the daily accrual in the portfolio. Recap: 2021 And 2022 These two years were marked by yield levels in the market moving up. Bond yields and prices move inversely, and hence market-related components were impacted adversely. While the coupon...