Liquid Fund Growth Rates: Why Are They Trending Lower?

Liquid Fund Liquid Fund Liquid Fund Growth Rates: Why Are They Trending Lower? By Scripbox March, 2021

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[{"selector":"#anim-b7729582-67bb-4119-8b70-132fc5a97bd6","keyframes":{"transform":["translate3d(0px, 100%, 0)","translate3d(0px, 0px, 0)"]},"delay":350,"direction":"normal","duration":600,"easing":"cubic-bezier(0.445, 0.05, 0.55, 0.95)","fill":"both"}] [{"selector":"#anim-45a0f8e1-3edb-4dcd-b7e1-b832cd970690","keyframes":{"transform":["translate3d(0px, 20%, 0)","translate3d(0px, 0px, 0)"]},"delay":450,"direction":"normal","duration":600,"easing":"cubic-bezier(0.445, 0.05, 0.55, 0.95)","fill":"both"}] [{"selector":"#anim-cd3de288-5225-43f3-9674-e26fffea3301","keyframes":{"opacity":[0,1]},"delay":450,"direction":"normal","duration":600,"easing":"cubic-bezier(0.645, 0.045, 0.355, 1)","fill":"both"}] [{"selector":"#anim-716c4c3c-10dc-4f9e-a273-ed2a98abdcca","keyframes":{"transform":["scale(0.05)","scale(1)"]},"delay":101,"direction":"normal","duration":1401,"easing":"cubic-bezier(0.77, 0, 0.175, 1)","fill":"both"}] [{"selector":"#anim-5ee35a5a-50c1-474e-ad6d-475dbdd0c534","keyframes":{"transform":["translate3d(0px, 100%, 0)","translate3d(0px, 0px, 0)"]},"delay":350,"direction":"normal","duration":600,"easing":"cubic-bezier(0.445, 0.05, 0.55, 0.95)","fill":"both"}] [{"selector":"#anim-7e937a2e-dbf2-4cd4-9d12-284f7b4aed76","keyframes":{"transform":["translate3d(0px, 20%, 0)","translate3d(0px, 0px, 0)"]},"delay":450,"direction":"normal","duration":600,"easing":"cubic-bezier(0.445, 0.05, 0.55, 0.95)","fill":"both"}] [{"selector":"#anim-eb3c4ad8-0f0a-4203-8d86-d2d900021db7","keyframes":{"opacity":[0,1]},"delay":450,"direction":"normal","duration":600,"easing":"cubic-bezier(0.645, 0.045, 0.355, 1)","fill":"both"}] Liquid Funds: The RBI periodically cuts repo and reverse repo rates to support the economy. The RBI Impact Some of the instruments liquid funds invest in are T-Bills and government securities. The yields of these instruments have declined with the lowering repo rate.

[{"selector":"#anim-973ee9b3-8aca-4514-920d-079a8828a9a0","keyframes":{"transform":["translate3d(0px, 100%, 0)","translate3d(0px, 0px, 0)"]},"delay":350,"direction":"normal","duration":600,"easing":"cubic-bezier(0.445, 0.05, 0.55, 0.95)","fill":"both"}] [{"selector":"#anim-3b5603a0-695c-4e6e-9f73-9626a39731d9","keyframes":{"transform":["translate3d(0px, 20%, 0)","translate3d(0px, 0px, 0)"]},"delay":450,"direction":"normal","duration":600,"easing":"cubic-bezier(0.445, 0.05, 0.55, 0.95)","fill":"both"}] [{"selector":"#anim-e7993ca5-0a6d-43c6-9e91-267722156c0b","keyframes":{"opacity":[0,1]},"delay":450,"direction":"normal","duration":600,"easing":"cubic-bezier(0.645, 0.045, 0.355, 1)","fill":"both"}] [{"selector":"#anim-9e9dedae-ac22-4c86-b9d0-12fef9d6d164","keyframes":{"transform":["scale(0.05)","scale(1)"]},"delay":101,"direction":"normal","duration":1401,"easing":"cubic-bezier(0.77, 0, 0.175, 1)","fill":"both"}] [{"selector":"#anim-8b9ee955-75d1-47b5-872a-a2d727c7a81b","keyframes":{"transform":["translate3d(0px, 20%, 0)","translate3d(0px, 0px, 0)"]},"delay":450,"direction":"normal","duration":600,"easing":"cubic-bezier(0.445, 0.05, 0.55, 0.95)","fill":"both"}] [{"selector":"#anim-5d6c7b1d-b5d7-4cba-9a0c-164f06c02273","keyframes":{"opacity":[0,1]},"delay":450,"direction":"normal","duration":600,"easing":"cubic-bezier(0.645, 0.045, 0.355, 1)","fill":"both"}] Changing Risk Profile In 2019, SEBI issued directives to augment the Risk Management Framework for liquid funds, mandating them to invest minimum 20% net assets in Liquid Assets (cash, T-bills, etc.) As these are relatively low-risk, the yields are on the lower side.

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[{"selector":"#anim-fba23cc1-131c-4cdc-8d2e-c3e7a90f2b05","keyframes":{"transform":["scale(0.05)","scale(1)"]},"delay":101,"direction":"normal","duration":1401,"easing":"cubic-bezier(0.77, 0, 0.175, 1)","fill":"both"}] Mutual Fund investments are subject to market risks, read all scheme related documents carefully.