Monday, March 23, 2009

NEGATIVE RETURNS IN LIQUID FUND?????

From: ajay kumar


Hi Sir, What's happening with these income funds? where r they
heading? what's your take on income funds? I had invested 20000 in
Hdfc Income fund(of course as per your advice) on 26th DEC and now it
is showing negative returns. what's your take on Hdfc Income fund ?
should i stay invested with it? if yes how long? thank u.


SRIKANTH SHANKAR MATRUBAI replied :
Dear Ajay Kumar,
Yes, your investment in HDFC Income Fund would be showing a negative return of 2.74% as on date.
The reason for the negative return (for now) is because of the Budget and Elections, the Govt, in need of huge money, sucked out liquidity from the Gilt Market which triggered a sudden spike in yields and hurt ALL Income Funds. You should be prepared for such short-term volatility in the NAV.

HDFC income Fund, like all Income Funds, also invests in Govt Securities. However, thankfully, this is limited to around 30% of its portfolio. Going Forward, the falling interest rates and lesser Govt Borrowing will give better and More returns than Fixed Instruments. From a 1 year perspective, the Fund should be able to comfortably give you more than 14% at least.
The HDFC Income Fund has quitely increased to Top Rated Corporate Debentures with Collateral Security and should give better returns than peers.

Best of luck,
Srikanth Shankar Matrubai



Also visit http://equityadvise.blogspot.com for an indepth Equity Analysis

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