He said the outlook has become tentative after recent moves by the RBI, even though the central bank has indicated further cuts if the situation improves and inflation comes down.
In the one-year period, gilt funds
had outperformed most other debt categories with gains of over 10 per cent.
Experts say there are multiple factors at play that can impact the future performance of this category. “The inflation forecast for the first half of 2020 is benign with food inflation expected to soften by February. The growth outlook remains challenging. The RBI seems committed to ensuring there is adequate liquidity,” said Anurag Mittal, fund manager and associate director, IDFC AMC.
“While a moderate fiscal slippage because of lower tax collection and the slowdown in nominal gross domestic product is priced in by the markets, any fiscal stimulus will lead to a rise in term spreads,” he added.
At the end of October, gilt funds
accounted for more than Rs 8,500 crore of assets under management, showed data from Association of Mutual Funds in India.
Advisors say gilt funds may not be a suitable product for retail investors, given the various factors that can influence the performance. “These funds are for investors who can make tactical calls, time their entry and exits, and closely track and monitor interest-rate cycles,” said Amol Joshi, founder of Plan Rupee Investment Services.