Aditya Birla Sun Life Mutual Fund has launched the new fund offer (NFO) of Aditya Birla Sun Life Crisil IBX Gilt April 2033 Index Fund. The NFO opened for subscription on December 15, 2023 and will close on December 21, 2023.
This fund uses a passive investing strategy to allocate 95 per cent of its assets in instruments forming part of the Crisil IBX Gilt Index – April 2033. The minimum investment amount is Rs 1,000 and in multiples of Re 1 thereafter. There is no exit load in the scheme.
According to Aditya Birla Sun Life Mutual Fund, there are many reasons for investing in this scheme, such as India’s inclusion in the JPMorgan Bond Index from June 2024, and a promising development for Indian G-sec bonds. Also, net flows into fully accessible route (FAR) securities after the announcement of this development have already surpassed Rs 14,000 crore as of November 13, 2023, the fund house said.
“Positive macros coupled with India’s inclusion in JPM index are likely to compress the Indian government bond yields, presenting a tactical opportunity for capital gains along with locking current elevated yields,” it added.
The elevated G-sec yields currently presents opportunity for potential capital gains and higher accrual benefits. Investors can benefit from potential price returns with higher duration once the yields starts falling, the release said.
Col. Sanjeev Govila (Retd), a Securities and Exchange Board of India (Sebi)-registered investment Advisor and CEO of Hum Fauji Initiatives, a financial planning firm, says that current elevated interest rates will go down sooner than later.
“If any investor locks into long-term bonds currently, there is a good likelihood of good gains with safety from two angles – high interest rates at which such bonds are available would provide a good accrual income, while there would be good mark-to-market capital gains arising out of inverse relationship between interest rates and bond prices. And if the locking in is done in G-secs, this dual benefit accrues with high safety,” he says.
He further notes that short-term interest rate risks will continue due to geopolitical risks. He recommends this fund for investors seeking a two-three year investment horizon, adding that its open-ended nature gives investors an option to take calls in case of interest rate cycles not playing out as envisaged.
