IDFC Mutual Fund’s new fund offer (NFO) for the open-ended target maturity Index fund, IDFC CRISIL IBX Gilt April 2026 Index Fund, opened on Wednesday
The NFO will continue from October 13 to October 19, 2022. The fund will track the benchmark CRISIL IBX Gilt Index – April 2026.
Commenting on the new product, IDFC AMC CEO Vishal Kapoor said the fund offers the comfort of investing in high-quality debt instruments. Additionally, it provides significant liquidity with an option to redeem investments on any business day.
Target maturity funds provide investors with predictable returns if they stay invested till maturity. These funds also offer indexation benefits for investments above three years, helping investors save tax on long-term capital gains and enhance their earnings potential.
Kapoor said the fund would help investors diversify their portfolios with quality debt instruments that offer “stability, higher liquidity, and greater flexibility than traditional fixed-term instruments.”
The minimum subscription amount for lumpsum purchase is Rs 5,000 during the NFO, and after that, in multiples of Re 1. On the other hand, the minimum SIP amount is Rs 1000, and after that, in multiples of Re 1. It has no exit load.
The product is suitable for investors seeking income in the long term. Kapoor said the fund offers low-cost access to high-quality debt investments “with a matching investment time horizon.”
Yields, especially at the shorter end of the yield curve, have increased due to higher market expectations from the monetary policy tightening. Data provided by the fund house showed that the difference in yield on government securities (G-Sec) for the shorter and longer end is significant.
The difference between the three-year PSU AAA yield and the three-year G-Sec yield is 21bps. Historically, the average spread was 50 basis points (bps).
Likewise, the difference between the three-year state development loan (SDL) yield and the three-year G-Sec yield is 19 bps, while the historical spread was 41 bps.
“Given the upward yield shift in the 3–4-year maturity bucket, we believe the 2026 GILT segment offers an interesting investment opportunity,” said fund manager Gautam Kaul.
IDFC CRISIL IBX Gilt Index Fund has a relatively high-interest rate risk and relatively low credit risk.
