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Corporate bond funds: Assess portfolio quality, expense ratio before entry

Expect stable accrual-based returns rather than significant capital gains

Midcap, market capitalisation, Mutual Funds, Amfi, The Smart Investor, Markets, mcap
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Decline in yields, in anticipation of RBI’s rate cut cycle, boosted returns over the past year. Since February 2025, the RBI has cut the repo rate and cash reserve ratio (CRR) by 100 basis points each.

Sarbajeet K Sen

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Corporate bond funds (CBFs) attracted ₹11,983 crore in net inflows in May, the highest among debt fund categories, according to data from the Association of Mutual Funds in India (Amfi). These funds invest in corporate bonds rated AAA and AA+, and hence carry low credit risk.
 
“The surge in investor interest in CBFs, leading to high inflows in May, is probably driven by relatively attractive yields compared to government securities, making high-rated bonds appealing. Ample system liquidity from the Reserve Bank of India (RBI) operations has also encouraged investment,” says Devang Shah, head – fixed income, Axis Mutual Fund.

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