Debt Income Funds – NAV Doubt

POSTED BY Ramprakash ON June 19, 2012 6:56 pm COMMENTS (5)

Why does the NAV of debt funds like Birla Sunlife Dynamic Bond Fund & SBI Dynamic Bond Fund (both Growth Option) come down on a few days?
Since the equity component is zero, the daily NAV should keep increasing owing to accruing of interest. But I have observed that on certain days it actually goes down?
Does anyone know the reason behind this.
For eg, Yesterday (18/06/12) the NAV of SBI Dynamic Bond Fund had actually gone down!!!
Thanks
Ramprakash

5 replies on this article “Debt Income Funds – NAV Doubt”

  1. Ashal Jauhari says:
    June 20, 2012 at 11:25 pm

    Dear Ramprakash, the NAV is coming down due to MTM – Mark to market. For example a bond in the portfolio was quoted 105 Rs. a day earlier & now Rs. 104.5 on next day but in between the accruing interest benefit is not that much to over come this sudden price fall of bond, that’s why the NAV came down.

    Thanks

    Ashal

    Reply
    1. Ramprakash says:
      June 21, 2012 at 12:38 am

      Oh Ok. SBI Dynamic Bond Funds’ NAV has been going down for last three days.

      So can the NAV of all type of debt funds (liquid, short term, ultra short term,etc) come down or is it restricted to Dynamic Bond funds (Income Funds) only?

      I ask this because I have been observing a few debt funds for the last 2 weeks, and I have noticed the fall in NAV on a few days only in SBI Dynamic Bond Fund (very often) and Birla Sunlife Dynamic Bond Fund (a few times).

      Thanks
      Ramprakash

      Reply
      1. Ashal Jauhari says:
        June 21, 2012 at 9:55 pm

        Dear ramprakash, a practical answer is – Yes all debt funds’ NAV may come down but the risk is higher in long term or med. term funds & very less or near to zero in ultra short term or liquid & liquid plus funds.

        Thanks

        Ashal

        Reply
        1. Ramprakash says:
          June 22, 2012 at 1:56 pm

          Thanks Ashal, that was very helpful.

          When the NAV of debt fund was going down, I was worried thinking that the AMC Fund Manager made a bad call by lending money to a firm that defaulted in paying back the capital/interest.

          Thanks Again.
          Ramprakash

          Reply
          1. Ashal Jauhari says:
            June 22, 2012 at 6:15 pm

            Dear Ramprakash, what you are telling is also a possibility.

            Thanks

            Ashal

            Reply

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