Debt: Medium to Long Duration

What is it?

Medium to long-duration debt funds invests in debt & money market instruments with a weighted average maturity (Macaulay duration) between 4 to 7 years.

Objective

The objective of these funds is to generate stable returns with lower volatility over the medium term. The medium to long-duration debt funds will provide stable returns during the period of falling interest rates.

Suitability and opinion

These funds are suitable for risk-averse investors who are seeking to generate stable returns to fulfill their medium-term goals and for aggressive investors looking to diversify some portion of their portfolio into stable assets. We believe that these funds have a far lower risk compared to equity funds but their prices can fluctuate moderately if interest rates change. We feel that investors can avoid investing in this category and opt for short-duration debt funds if they want some debt exposure in their portfolio. This category has been adversely affected by the government's decision to remove indexation benefits.