Investors shoudn't drop their guard, it's not the time to take credit risks

RBI action has averted duration risk, but defaults could mar debt fund returns

Retail investors nowadays regard volatility in their equity portfolio as a par for the course. However, turbulence of a similar magnitude in the fixed-income portfolio catches them off-guard. Many investors received a jolt last week when the average returns of several categories of debt funds, including those with a shorter duration which are purportedly safe, turned negative. However, strong action by the Reserve Bank of India (RBI) in its March 27 monetary policy helped debt funds retrieve lost ground.  

Bond prices had fallen and yields had shot up across the interest rate curve during the fortnight preceding the RBI action. The