Kotak Banking and PSU Debt Fund - Low Risk Gains From Stable Securities
Banking and PSU Debt Funds have been gaining popularity in recent years due to their ability to provide stable gains at low risk. Kotak Banking & PSU Debt Fund is one of the oldest schemes in the category which has been delivering consistent gains for more than 2 decades. It is an ideal replacement of the fixed and recurring deposits of banks as it can produce comparably much better returns and offers high liquidity. Those investors familiar with the types of debt mutual funds might know that short term funds offer lesser risk while income funds provide higher returns. Kotak Banking & PSU Debt Fund has the aptness to fit in the shoes of both as it can provide higher and consistent returns without taking high risk.
How Does Banking & PSU Debt Fund Work?
These are the mutual funds that invest in the fixed income securities issued by banking or PSU companies through SIP or lumpsum. Such securities offer low risk as they either have a business in the financial sector or are backed up by the government. These securities provide pre-defined accrual amount on maturity and the gained amount is divided among the investors on the basis of units. Apart from that, gains are also provided by the instruments if the interest rates fall. The interest rate cut in recent years has allowed such tools to deliver better gains. These securities offer high liquidity to the fund as the fund managers can sell them anytime when the interest rates rise or fall to take advantage of the market conditions.
Kotak Banking & PSU Debt Fund - What You Must Know
Kotak Mahindra Mutual Fund launched this scheme in December 1998 to allow investors to gain better returns at low risk. This fund has been a top performer in the category for many years and has beaten benchmark and category average many times in the past. Following are the traits of the scheme that every investor must know before investing:-
- The fund is managed solely by Mr Deepak Agrawal since 2008 who is highly experienced in handling debt investments.
- The securities chosen for Kotak Banking & PSU Debt Fund are Certificate of Deposits and bonds/debentures of banks which generally have credit ratings of AAA. Hence the portfolio has high credit quality.
- The securities issued by Public Sector Companies offer lesser risk as the taxation power of the government back up these securities.
- Majority of the instruments offer high liquidity which allows Mr Agrawal to take advantage of changing market conditions for debt securities.
- The maturity tenure of the instruments ranges between 2 to 4 years.
- The fund manager is focused on securities with better credit quality and the portfolio is actively managed.
Kotak Banking & PSU Debt Fund - Where Does it Invest?
The primary target of the portfolio of Kotak Banking & PSU Debt Fund are debt and money market instruments of banks, financial institutions, Public Sector Undertakings (PSUs), Public Financial Institutions (PFIs), Municipal and sovereign securities issued by the Government. The fund manager also invests in securities which are unconditionally guaranteed by the Central and State Government of India. The total number of securities range from 35-40. As these instruments have high liquidity, the investment strategy is dynamic and Mr Agrawal alters the investment strategy according to the market conditions. The credit quality of non-government instruments is AAA and AA while the G-secs are of SOV ratings. Majority of the instruments are sensitive to fluctuations of interest rates hence they have high rate sensitivity.
What Can You Gain?
Kotak Banking & PSU Debt Fund has maintained consistency in returns since inception by taking advantage of every market conditions. However, when the interest rates have hiked in the past, returns have lowered for short term. It has maintained decent but consistent returns since inception. It has not faced severe market conditions in recent years hence the past performance should not be the only parameter to consider while selecting the scheme. Investors can expect capital gains of more than 8% annually in the tenure of 2 years or more although it cannot be guaranteed. Investors can easily calculate the expected capital gains by using the mutual fund SIP calculator at MySIPonline.
If you are planning to invest in the promising fixed income securities with high liquidity, Kotak Banking & PSU Debt Fund is what you are seeking. Start investing today to enjoy the capital gains if the fund suits your investment objective. Connect with our experts in case if you need any kind of assistance or suggestions regarding mutual fund investment.