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Business News/ Money / Personal Finance/  Mutual funds: These tweaks can help your portfolio generate higher returns

Mutual funds investment is expected to take some shift in terms of return as Reserve Bank of India ((RBI) has paused interest rates in its recent monetary policy committee (MPC) meeting. According to tax and investment experts, short term mutual fund investors who are planning to invest in new fund should rejig their plans after the surprise RBI's move. 

Wealth managers said that debt mutual funds are expected to go back stage as ultra short duration funds, short duration funds and liquid funds may give better returns in short term. For those investors who want to invest for one year or above but they are undecided about the time horizon, they can look at dynamic bond funds. They said that by doing this, a mutual funds investor will be able to garner more return on one's money in comparison to traditional debt mutual funds.

On RBI policy meeting outcome for mutual funds, Puneet Pal, Head-Fixed Income at PGIM India Mutual Fund said, "The market was divided going into the policy with the swaps market pricing in a 50% probability of a pause. Bond yields had also come down in the last couple of days and thus the pause decision had a relatively muted impact on the market with the yield curve steepening as the 5yr G-sec yield came down by 13 bps and the 10yr yield was down by 6bps. Going ahead, the market will focus on RBI’s liquidity management and global yield movements. Supply pressure can negate any meaningful downside in yields and we expect the benchmark 10yr bond to trade in a broad range of 7.00% to 7.40% and the steepening bias to continue over the next one quarter."

Which mutual fund to buy after RBI policy?

On his suggestion to mutual fund investors after the surprise move by RBI, PGIM India Mutual Fund expert said, "We recommend investors to increase their investments in Short Duration category with predominant sovereign holdings while selectively looking at Dynamic Bond Funds as per their risk appetite.

Speaking on mutual fund tweaks that one needs after pause in interest rate by the RBI, Pankaj Mathpal, MD & CEO at Optima Money Managers said, "Short term mutual fund investors are advised to classify their investments on the basis of time horizon. Those, who have up to three month time horizon, they can opt liquid funds whereas for three months to one year, ultra short duration funds can be a good option."

Pankaj Mathpal of Optima Money Mangers went on to add that a mutual fund investor can having time horizon for one year to three years may look at short duration funds for higher returns in the wake of interest rate pause. The wealth manager went on to add that those who have more than one year time horizon but they are undecided about the time horizon, they can for the dynamic bond funds.

Asked about the suitable mutual fund plans that one can opt in above mentioned categories, Pankaj Mathpal listed out the following schemes for a mutual fund investor:

- Liquid fund (For less than three month time): Quant Liquid Fund, Nippon India Overnight Fund;

- Ultra Short Duration Fund (3 months to 1 year): ICICI Prudential Ultra Short Term Fund, ICICI Prudential Savings Fund;

- Short Duration Fund ( 1 year to 3 years): Axis Short Duration Fund; and

- Dynamic Bond Fund ( 1 year+): ABSL Dynamic Bond Fund.

Disclaimer: The views and recommendations made above are those of individual analysts or wealth management companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Asit Manohar
Chief Content Producer at Live Mint Digital Team
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Updated: 10 Apr 2023, 11:41 AM IST
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