DSP bets on fixed income MFs

Hyderabad: DSP, an investment managing company, said during this period of economic slow growth and volatile market, the best option for investors is fixed income mutual funds than equity funds.

The asset management company said that equity investments are related to creating wealth whereas fixed income investment focus on preserving capital and generating steady income.

Saurabh Bhatia, Head of Fixed Income, DSP Investment Manager, said: "Allocating a portion of portfolio to fixed income investments can potentially help offset losses when equity markets are unpredictable. Also, its ideal for investors seeking to park their surplus funds lying idle."

Bhatia further said that the fixed income funds have exposure to instruments which provide a fixed return on pre-determined dates, which allows the funds to generate consistent returns as compared to equity funds.

Moreover, investors can avail indexation benefits while calculating long term capital gains tax for investments held for over three year, the official said.

Speaking about liquidity expectations in the fourth quarter of FY 2019, Bhatia said that the liquidity conditions are expected to remain tight through Q4 because of buildup in the government cash balances.

'The gap in credit-deposit growth is likely to exert upward pressure on banking deposit rates and high deposit rates offered by private sector banks. Also, skewness in mutual fund flows towards short end is likely to skew supply downwards at the short end of the curve," he added.

And, borrowing rates are likely to move north as more supply will hit the curve, he said, adding that the volatility is expected to subside in the first quarter of FY20, on ease in liquidity and decline in the pressure on supply.