Upbeat outlook amid stable credit environment, high portfolio yield

Take moderate exposure to these funds, given the potential for defaults and downgrades in their lower-rated portfolios

Among debt funds, credit risk funds have emerged as the best-performing category with an average return of 7.67 per cent over the past year.

“Credit risk funds have outperformed other fixed-income categories due to their higher accrual, as rates have largely remained range-bound this year,” says Anurag Mittal, head of fixed income, UTI Asset Management Company (AMC).

“Also, certain stronger issuers within the credit category have witnessed spread compression as they have deleveraged their balance sheets. Furthermore, a few funds have seen recovery from stress cases, which has boosted their near-term performance,” Mittal adds.

According to Joydeep Sen, corporate trainer