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Gilt’s a Hit Beats the Sensex,

In anticipation of further rates cut, sharp drop in inflation, a stable rupee and oil as well commodity prices cooling off the gilt funds have excelled and outperformed the sensex during the past year. The gilt funds usually invest in medium to the long term government bonds and thereby makes the most during the bond rally when the prices of the underlying asset rises.

The gilt funds have done well since the past six months so as to make the investor especially the HNIs go merrily home bagging returns of 5.73% and on the other hand the sensex wilting by 1.7% . The gilt funds witnessed an avalanche of inflows to the tune of Rs7, 712 Crores during the financial year where the sensex was trailing at 14.7% and the gilt funds marching ahead at 15.2% and during the last financial year the outflow of these funds were Rs1, 868 crores.

With the rates cut around the next corner and the retail inflation tanking from 8.31% to 4.87% the gilt funds are expected to deliver a minimum of 10% returns this year even equities are expected to deliver higher returns but gilt will be the winner amongst the two especially at the commencement of the interest rate cycle but after a period of three year or so the equities tend to outperform the gilt funds.

So after the sharp correction in the equity markets which have removed the excess of the froth so the lower inflation, rates cut and wave of positive news will swing the sentiments will eventually revive and boost the corporate earnings in the coming times.