It is important to understand debt funds after the budget, investors should pay attention

The most awaited event of the year, the Union Budget, has now arrived and it has left people with repeated questions as to what is in it for me. Will it affect my life? Will it affect my portfolio?

debt fund

The most awaited event of the year Union Budget ,Budget 2022, Now it has arrived and it has left people asking questions again and again as to what is in it for me. Will it affect my life? does it affect my portfolio (Portfolio) Has any effect. However, the equity market (Equity Market) Has taken the budget well, but the average debt investor (Investor) Didn’t get any good news, but in fact it has allayed concerns. The last two years have been exceptionally difficult for the country. To bring the economy back on track, it needed enough support and stimulus to generate better growth rate than yesterday.

Globally, all central banks were borrowing at almost zero rates and giving it to the public at almost zero rates. So, especially during Kovid, the Reserve Bank of India also borrowed less and gave money at cheaper rates.

Prices fall when supply increases

It’s been going out for a long time. It is important to remember the amount coming into the system due to demonetisation. When supply increases, prices fall. When a large amount of money was available in bank accounts, FD rates fell, because banks had more money than they needed, so why should they pay more interest. Overall, it is a long term trend. The rate of 1 year fixed deposit is now 5 per cent. Most of the time it will give a purely negative return after inflation and tax, but then many people don’t consider it when they have the assurance of getting returns.


Mayukh Dutta

What could the saver do? Simply put, the saver has become the investor, the risk, tenure and returns in his portfolio have increased. Today equity as an asset class has spread and awareness has increased. Especially, investment through SIP is increasing every month. However, debt and equity markets do not work in the same way. The rise and fall of debt rates has a different structure.

Simply, long term funds perform well if interest rates are falling, as it did in 2019-20. In the past two years, interest rates around the world were low, allowing people and companies to borrow, consume and sell at lower rates. This cycle is now reversing. The loose money in the world has almost achieved its objective of generating growth. That growth is now heading towards inflation. To address inflation, central banks are reducing the flow of money and thus making money expensive, hence increasing interest rates. Now governments will be expensive and so will others down the chain.

(Author: Mayukh Dutta, Head, Product and Strategy Communication)

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