RBI Governer decision on Fixed Income Fund

POSTED BY Sampath G ON February 11, 2014 5:18 pm ONE COMMENT

Hi all

I came across this article (http://www.valueresearchonline.com/story/h2_storyview.asp?str=24567 )  and couldn’t understand it well. Recently i started investing some money in FMPs. What exactly the decision taken by RBI Governor? and how it’ll effect Debt MFs/FMPs.

Thanks in advance.

One reply on this article “RBI Governer decision on Fixed Income Fund”

  1. ashalanshu says:

    Dear Sampath, the price of the bonds (your money is ultimately invested in bonds in debt funds) changes in opposite direction from interest rates’ direction. So when RBI increases the interest rates, the price ‘ll come down and reverse ‘ll happen when RBI announces reduction in interest rates. Thus RBI’s stance on interest rates ‘ll impact the valuation of your fund’s assets (bonds where the money is invested).

    Due to this volatility in bond price, the NAV of your debt fund ‘ll also become volatile. This is the theme of the article you are referring to.

    Thanks

    Ashal

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