Invest in the best mutual funds recommended by Scripbox that are algorithmically selected that best suit your needs
Till Date CAGR
|ICICI Prudential Gilt Fund (G)|
|Nippon India Gilt Securities Fund (G)|
|Nippon India Gilt Securities Fund P F Defined Maturity Date (G)|
|Aditya Birla Sun Life Government Securities Fund Instant Gain (G)|
|Kotak Gilt Investment Fund Provident Fund and Trust (G)|
|HDFC Gilt Fund (G)|
|Kotak Gilt Investment Fund (G)|
|Aditya Birla Sun Life Government Securities Fund (G)|
|Bandhan Government Securities Fund Investment Plan (G)|
|PGIM India Gilt Fund (G)|
|Axis Gilt Fund (G)|
|Baroda BNP Paribas Gilt Fund (G)|
|SBI Magnum Gilt Fund (G)|
|UTI Gilt Fund (G)|
|DSP Government Securities Fund (G)|
|Canara Robeco Gilt Fund (G)|
|Franklin India Government Securities Fund (G)|
|HSBC Gilt Fund (G)|
|Edelweiss Government Securities Fund (G)|
|Invesco India Gilt Fund (G)|
Gilt funds are debt instruments that invest primarily in securities issued by Central and State Governments. They fall into the category that gives moderate returns and ensure safety
|Fund Name||Return Since Inception||Expense Ratio|
|SBI Magnum Gilt Fund||8%||0.94%|
|HDFC Gilt Fund||7.3%||0.89%|
|Nippon India Gilt Securities Fund||8.3%||1.86%|
|Axis Gilt Fund||7%||1%|
|ICICI Prudential Gilt Fund||9.5%||1.14%|
In India Gilt Funds are investment schemes that invest in Government Securities. The Reserve Bank of India (RBI) on behalf of the government issues these securities. These securities have varying maturities – medium to long term. Since gilt mutual funds’ investments are made to the government, they are considered to be safe. The RBI determines the interest for these securities, making them low-risk investment options.
Long term maturity schemes have high volatility, which means they can be bought and sold quickly because their default risk is almost nil. These funds do not have a risk of non-payment of principal or interest amount. However, there is a higher exposure to interest rate risk.
In the short term, they are considered to be the riskiest among all the debt funds. Gilt funds’ investments are highly vulnerable to interest rate risk. In a falling interest rate scenario, these funds can offer high returns.
It enable investors to invest in government securities. Otherwise, investing in them would require a vast sum. Investors can diversify by investing in it. These funds earn reasonable returns and help in wealth accumulation over the medium to long term.
When a State or Central Government requires funds, they approach the RBI. RBI then accumulates funds from insurance companies or banks and lends it to the government. In exchange, RBI issues Government securities for a fixed tenure. Gilt funds subscribe to these securities. The fund returns it once the security matures, and receives a pay out.
These funds generate returns through interest rate risk. Since the government backs it, the credit risk is almost zero. Interest rates and prices of government securities are inversely related. In other words, when interest rates rise, prices of government securities fall. It has a direct impact on its performance.
In India Gilt funds invest in securities issued by the government of varying maturities. There are two types of mutual funds in India:
Gilt funds primarily have these benefits when compared to other investment avenues.
Gilt funds have their own set of risks as well.
Gilt funds also charge a managing fee namely expense ratio. The expense ratio for all debt funds is capped at 2.25% on NAV by SEBI. The fund manager cannot charge more than this from investors. The investors have to be careful while choosing funds.
Like other mutual funds, its taxation depends on the holding period of the investment. Investments redeemed before 36 months is qualified for STCG, and investors are taxed at their slab rates. If redeemed after 36 months, then the investors are taxed at 20% after indexation benefits. As per the Finance Bill 2023, gilt funds will no longer have the LTCG benefit. Thus, from April 1st 2023, capital gains from gilt funds will be taxed as per the investor’s IT slab rate.
2019 was a favorable year for gilt funds in India due to the falling interest rate regime. This explains the double-digit returns from these mutual funds in India. However, interest rate movements are not unidirectional. There are chances of negative returns as they are highly volatile. Investors have to proceed with caution as the interest rate cuts are not expected soon .
Gilt funds invest in government securities with a medium to long term horizon. Hence these funds are prone to interest rate risk. When interest rates fall, the NAV rises, and when interest rates rise, the NAV of these funds fall. This leads to the yields becoming negative in the short run. Hence the best time to invest in gilt funds is when inflation is at its peak and RBI is not likely to increase interest rates in the near future.
Falling interest rates regime is the best time when one can invest in these funds. Falling interest rates will lead to an increase in the NAV of the fund, leading to growth in short term yields.
Gilt funds are mutual funds that invest in government securities. The tenure of these funds is between medium to long term. They best suit investors who prefer getting predictable returns. These are low-risk investments as the underlying securities are government securities, and the returns from these are guaranteed.
Debt funds are mutual funds that invest in corporate bonds, government bonds, money market securities, and other debt securities. The tenure for these funds is between 7 days to 5 years. Hence the suit investors with short term, medium-term and long term investment horizon. They are low-risk investments as their returns do not directly depend on the market. The returns are in the form of interest and hence are mostly predictable.
It best suit investors who seek the safety of their investments rather than high returns.
It offer moderate returns and ensure capital preservation. In comparison to an equity fund, it offer better asset quality. In a falling market scenario, these are effective. The interest rate volatility offers high returns but also exposes the fund to interest rate risk.