The lack of liquidity in the debt markets began to hurt mutual fund (MF) investors in the debt categories, with short-term market yields increasing by 100 to 150 basis points during the month. Classes.
Over a one-month period, medium-term plans posted negative returns of 3.4%, while short-term and short-term plans fell 1.7% and 1.9% respectively.
Experts say there have been strong sales of shorter-term bonds in the markets and, given the deadlock, their buying capacity has declined significantly.
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According to industry participants, fund companies are also forced to sell debt securities as investor buyback pressures peak.
“Foreign institutional investors have sold Rs 8,000 crore-Rs 10,000 crore during the current month. Meanwhile, market volumes have declined as fund houses and other participants see disruptions due to work at home advisories, “said a fund manager.
“Institutional investors have access to cash to meet their debt obligations while commercial operations are stalled. Other than that, investors withdraw funds during the quarter-end and year-end periods, “said another fund manager.
Overall, the debt market experienced massive sales from foreign institutional investors (FII) this month. According to data from the National Securities Depositories, the FII sold Rs 52,000 crore worth of securities in March.
Meanwhile, experts believe that widening spreads in the shorter-term bond market makes it an attractive proposition for taking up new positions. “The spreads have become attractive. These are expected to ease as the government injects cash into the system. Investors with short term and long term market exposure should continue with these funds. For new investors, this is a good opportunity. We should see some improvement in April, ”said Joydeep Sen, founder of sagesinvestisseur.in
The MF industry has sought liquidity support from the Reserve Bank of India (RBI) amid growing buyout pressures from liquidity companies, which hold shorter-term corporate bonds.