HDFC Debt Mutual Fund offers 26 different types of mutual fund schemes under the debt mutual fund category. The total AUM belonging to HDFC AMC schemes as on September 2023 is Rs 530,451 crores. The debt schemes include liquid funds, gilt funds, corporate bond funds, ultra short to long duration funds, banking and PSU funds, money market funds, and credit risk funds.
HDFC Debt Funds are less volatile in comparison to equity funds because they invest predominantly in fixed income instruments. Investors who traditionally invest in fixed deposits, recurring deposits and parking funds in savings accounts can consider investing in HDFC Debt Mutual Funds. These schemes are less volatile and can potentially deliver higher returns than other traditional investment instruments. However, investors must pick debt funds based on their financial goals. Also, HDFC Debt Funds are highly liquid, where investors can park their emergency or surplus funds for a shorter duration (usually less than 12 months). Moreover, many investors consider HDFC debt schemes as a measure to diversify a portfolio across asset classes.
Things To Consider Before Investing in HDFC Debt Mutual Fund
Investment Objective: The investment objective of HDFC Debt schemes is to generate reasonable returns with lower risk and high liquidity. To achieve its objectives, HDFC Debt Mutual Funds invests in fixed income instruments, money market instruments, and government securities belonging to different maturities and risk profiles.
Investment Strategy: The HDFC fund manager(s) aim to deliver reasonable returns keeping the risk factor low depending on the fund investment strategy. Also, HDFC debt schemes optimise the risk opportunities and maintain the balance between risk and returns. Furthermore, the fund manager actively monitors the micro and macroeconomic situations to assess the direction of interest rates. Accordingly, investors can align their investment objective with the fund investment strategy for wealth creation.
Associated Risk: HDFC Debt Mutual Funds carry a lower risk in comparison to equity mutual funds but carry a risk higher than fixed deposits and similar fixed income products. However, these HDFC Debt Mutual Funds also have the potential to deliver higher returns. Also, HDFC Debt Funds are subject to interest rate, credit, and liquidity risk. Moreover, as a risk reduction and control technique, the HDFC AMC’s fund manager will conduct a thorough credit evaluation of the issuer company. Therefore, investors must understand the risk associated with these debt schemes before investing in them.
The following table shows the taxation of HDFC Debt Mutual Funds for investments made till March 31st 2023 –
Short Term Capital Gains (STCG)
Long Term Capital Gains (LTCG)
Holding Period
If holding period is less than 36 months
If holding period is more than 36 months
Taxation
Capital gains are taxable as per investor’s income tax slab rates. The STCG is added to the gross total income for the financial year.
Capital gains are taxable at a rate of 20% with indexation benefit.
For investments in debt mutual funds from April 1st 2023, the capital gains will be taxable as the investor’s Income Tax Slab rate. As per the Finance Bill 2023, debt mutual funds will no longer have the LTCG benefit.
