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Gilt Funds Definition, Risk and Returns List of Gilt Mutual Funds in India

While the beleaguered AMC’s offerings baited investors with extra returns by investing in questionable low-rated bonds, such risk is rather the exception to the rule with underlying assets of debt funds. And, if it is a gilt fund in question, which is a kind of debt fund, then the risks are much lower. A. Gilt funds are considered a safe investment considering the zero credit risks in these funds.

So, investors can come in this kind of funds in a staggered fashion. In a three-to-five-month period, they can come into such kind of long-dated Gilt funds. So, investors can start looking at Gilt funds, but with a horizon of 2-3 years at least, if not higher.

The investment objective of the Scheme will be to generate returns from a portfolio from investments in Government Securities. This is to inform that, many instances were reported by general public where fraudsters are cheating general public by misusing our brand name Motilal Oswal. The fraudsters are luring the general public to transfer them money by falsely committing attractive brokerage / investment schemes of share market and/or Mutual Funds and/or personal loan facilities. Though we have filed complaint with police for the safety of your money we request you to not fall prey to such fraudsters. You can check about our products and services by visiting our website You can also write to us at , to know more about products and services. The NAV of the gilt funds is dependent on the existing interest rates.

For investors, the appeal of gilt funds lies in the potential for decent returns and relatively low level of risk. However, note that the performance of gilt funds relies heavily on interest rate movements, which is why it is ideal to invest in gilt funds at a time when interest rates are on the decline. Gilt funds are essentially investments in government securities in the form of debt funds. The name comes from the gilded-edge certificates that used to be issued for government bonds. According to Sebi’s regulations, gilt funds are supposed to make an investment of at least 80% of their total assets in fixed-interest generating government securities. These investments go towards funding infrastructure projects introduced by the Central and State government or other such expenses.

What is a Gilt Fund?

While the gains from the units redeemed after a period of 36 months are taxed as LTCG of 20% after the benefit of indexation. The maturity period is higher than five years and up to even 30 years. Long term gilt funds are riskier and volatile, as they are more sensitive to interest changes. When the government needs money to support a certain project, these securities are issued. The interest or coupon rate, as well as the maturity time, varies between these instruments. Gilt funds are a fantastic alternative for risk-averse investors because government assets are recognized to be a secure investment route.

  • A gilt fund is essentially a mutual fund that invests the money pooled from different investors into fixed income government securities.
  • Spikes in the returns are common and negative and near-zero returns have also been seen on a number of occasions.
  • But it needs reminding that not all debt funds are high-risk.
  • Fall under the category of Debt Funds and invest in Government securities.

Furthermore, even if the economy as a whole is in a depression, gilt funds are likely to outperform even equity funds. Gilt funds, unlike corporate bond funds, are the most flexible assets since they do not carry credit risk. The reason for this is that the government would always do its utmost to meet its duties. Gilt Funds by regulation have to invest at least 80% of their money in debt instruments issued by the government.

List of Gilt Mutual Funds in 2022

Read on to find out what the gilt fund meaning is as well as the basics of gilt funds in India. Gilt funds invest in government securities with a medium to long term horizon. When interest rates fall, the NAV rises, and when interest rates rise, the NAV of these funds fall.

  • The reverse relationship between bond prices and interest rates can affect the gilt fund returns.
  • If you are thinking of investing in gilt funds, then you need to have an investment horizon of at least three to five years.
  • Efiling Income Tax Returns is made easy with Clear platform.
  • In addition, the sensitivity of bond prices to interest rate movements is measured by modified duration.
  • It is an open-ended debt scheme investing in government securities having a constant maturity of 10 years.

The government issues these securities against money borrowed from banks and financial institutions. IDFC Government Securities fund has performed consistently over the last 10 years. The fund has generated highest returns in the category consistently over the short as well as long period. Along with the above-mentioned measures, the investors could also look at the funds with taking into account the taxability factor. With hardly any liquidity risk, these securities are amongst the categories of funds providing the highest liquidity to the investors. It best suit investors who seek the safety of their investments rather than high returns.

Top-performing gilt funds

The Morning star has answered some questions about Gilt funds, you can check them out here. Ltd. makes no warranties or representations, express or implied, on products offered through the platform. It accepts no liability for any damages or losses, however caused, in connection with the use of, or on the reliance of its product or related services.

  • This will protect them from upward interest rates movements.
  • If you are contemplating investing in gilt funds, your investment horizon should be somewhere around 3-5 years at the very least, as a gilt fund portfolio’s average maturity is around that same duration.
  • While the beleaguered AMC’s offerings baited investors with extra returns by investing in questionable low-rated bonds, such risk is rather the exception to the rule with underlying assets of debt funds.
  • So, that is what these covered call options can sometimes do.
  • When interest rates fall, the NAV rises, and when interest rates rise, the NAV of these funds fall.

Investors who are having long term horizon and tolerance of risk can keep some quantity of gilt funds in their portfolio provided they have an expert on mutual fund market to manage the portfolio. Gilt funds are the debt mutual fund schemes that invest in the securities issued by the Central or State Governments. As per SEBI mandates, the Gilt Funds need to have at least 80% of their assets invested in government securities. However in practice, most of the funds in the gilt funds’ category have invested almost all of their assets in G-securities with varying maturities. The securities or bonds issued by the government are generally used for funding the infrastructural or developmental activities related to the economy.

This has been caused primarily due to the liquidity issues and fear of default caused by the Covid-19 pandemic. Investors have preferred to shift their debt investments to these funds because of the zero credit risk feature they carry. Falling interest rates regime is the best time when one can invest in these funds. Falling interest rates will lead to an increase in the NAV of the fund, leading to growth in short term yields. But, gilt funds are largely exposed to interest rate risk. During periods of rising interest rates, the fund’s net asset value plummets dramatically.

Fund Follow

While no mutual fund can provide guaranteed capital protection, gilt funds are among the few that do. Investments are made in government-backed securities, therefore there is very little risk of a substantial financial loss. The tax rate is determined by the length of time the investor has invested in the fund. Due to lower interest rates, India’s gilt funds have been working quite favorably. Gilt funds have generated two-digit returns for investment trusts in India.

guilt funds

Further, these funds can help you generate wealth over the medium tenure. Also, if the interest rates are in a falling cycle, then you can earn good returns in the shorter term too. An open-ended debt scheme investing in government securities across maturity. A relatively high interest rate risk and relatively low credit risk. This should ensure a limited upside to bond yields, as the market tends to discount the future well in advance. Bond prices decrease when interest rates rise and vice versa.


But a slump in the economy would be a good time to consider gilt funds, depending on our portfolio diversification needs. It does not mean gilt funds in India are without their share of risks. You can divide your goals into short-term, medium-term and long-term, depending on your goals.

What are Gilt Funds? Should you Invest or Not?

LTCG tax, on the other hand, is a flat 20% with indexation benefits. Debt funds suffer from the current climate of rising rates. However, because inflation is caused by supply side reasons rather than demand side factors, the RBI will find it challenging to hike rates further. Additionally, provision vs accrual hiking rates further will hamper the economic growth and the RBI may eventually be restricted at a certain point to raise rates. In India Gilt Funds are investment schemes that invest in Government Securities. The Reserve Bank of India on behalf of the government issues these securities.

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