Debt assets' exposure to G-Sec hits 11-month high

Fund managers shifting to G-Sec on hopes of a rate cut by the RBI

With interest rate cut on the anvil, India's debt fund managers have taken nearly 10% exposure to government papers - the highest in 11 months.

Of the total debt assets under management (AUM) of Rs 7.89 lakh crore as on 30 November, about Rs 77,870 crore has found its way into government securities.

So far this calendar year, there has been a steady increase of investments in G-Sec. At one point of time, exposure to such securities was as low as 6.5%.

With the current 10-year bond yield hovering at 8%, fund managers said that investments in fixed income products are worth making from a 6 to 12 months perspective as returns from debt products are likely to converge with what equities have to offer.

Further, a substantially higher proportion of investments into G-Sec is in schemes with maturity of more than one year. Debt experts have been recommending investors to add duration in their existing debt portfolios.

It was in December last year that fund managers had raised their exposure to G-Sec to a high of 11% on hopes of a rate cut. However, in absence of any such move from the RBI they had trimmed their investment in the government papers.

But over the last few months fund managers have changed their stance and started pumping money into G-Sec again.

November witnessed a rise of about 6% in Gilt funds investors' base to 54,487 over the previous month. The period saw gross sales of Rs 1,236 crore. As on 30 November, mutual fund sector offered 46 Gilt funds to investors.