Short-maturity funds outperform in June quarter: Crisil

Cautious central bank drags performance of longer-maturity funds

CRISIL Research has said debt funds with shorter maturity outperformed longer maturity schemes in the June quarter. The outperformance was on account of lower bond prices at the long end of the yield curve brought on by the Reserve Bank of India (RBI)’s cautious monetary stance, said the report.  

Those at the shorter end of the curve are less affected by such volatility. Also, prices of short-term bonds went up as yields eased, which was a positive for such funds.  

“Liquid funds, as represented by the CRISIL–AMFI Liquid Fund Performance Index, emerged as the best performing category among short-maturity funds. They gained 2.09 per cent, followed by ultra-short term funds (2.08 per cent) and short-term debt funds (1.40 per cent),” said the report.  

Liquid funds buy bonds and hold it till maturity. This is called the accrual strategy. It is considered more stable than the approach of long-duration funds, which hope to profit by changes in bond-prices. Long-term maturity funds had outperformed earlier on hopes that the RBI would cut rates aggressively, noted the report.  

“The yield on the new benchmark 10-year gilt 7.72 per cent 2025 paper issued on May 22, hardened by 14 bps to settle at 7.86 per cent on June 30, while the old 10-year benchmark 8.40 per cent 2024 paper closed at 8.04 per cent compared with 7.74 per cent on March 31,” it said.