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Top Debt funds to invest

By SiliconIndia | Tuesday, 19 July 2011, 04:44 Hrs

Bangalore: Confused about which Mutual Fund to invest in? Sharekhan suggests that debt-oriented schemes available in the market are the best option.These are based on the Average rolling returns for one and two years, Sharpe ratio, Fama (net selectivity), Credit quality and Average Maturity. The Eligibility criteria set by Sharekhan is, the scheme existence for more than 2 years and cut off of minimum 10 percent of category AAUM. After considering all the parameters we arrive at composite score by assigning specific weightages.

A debt mutual fund scheme invests in debt papers like government bonds, fixed deposits, approved private deposits and so on. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors. There are many reasons why debt funds are the best option. After moving up for two consecutive months, bond yields went down slightly in June amid tight liquidity conditions. Rate hike and high inflation affected the bond market. Finance Ministry officials? concern over the rise in benchmark yield in the recent past, suddenly increased bond prices. Demand for sovereign debts in India also increased amid tight supply and uncertainty over sovereign debt crisis in Greece.

ShareKhan's top debt fund picks include:-

Monthly Income Plan: Funds that offer a marginal flavor of equity (upto 15 percent or more) especially for portfolios that are otherwise debt oriented. They predominantly invest in debt and money market instruments.
The five schemes under Monthly Income Plan are HDFC Monthly Income Plan - Long Term Plan - Growth, Birla SF MIP, Canara Robeco MIP, Birla SF MIP Sav. 5,

Income Funds: Funds that invest in income bearing instruments with any maturity and across the yield curve to generate regular income, such as corporate bonds, gilts, treasury bills, certificates of deposit and commercial papers etc.
The five Income funds are Birla SF MTP, ICICI Pru MTP, Birla SL Dyn. Bond DAP , Birla SL Dynamic Bond, DSP BR Strategic Bond.

Short Term Debt Funds: Funds invest in short-term debt instruments of high quality and low risk, that mature in about next 15 to 18 months and generally best suited to investors with 1 to 2 years of investment horizon.
The five schemes are DSP BR Short Term, Canara Robeco ST, BNP Paribas ST Income, Templeton India ST Inc, IDFC SSI-MTP A.

Ultra Short Term Funds: Funds that invest exclusively in debt instruments with very short maturity period, usually one year or less.
The five schemes are Tata Floater, Kotak Floater LT, Baroda Pion. Treasury Adv, JPMorgan India Treasury, Reliance Money Manager.

Floating Rate Funds: Funds that predominantly invests in debt securities with a floating rate of interest. And these debt securities peg their coupon or interest rate payable to market driven rate such as Mibor.
The five schemes are Canara Robeco FRF, Birla Sun Life FRF LTP, Birla Sun Life FRF STP, UTI FRF STP, IC FRF ST

Liquid Fund: Funds investing only in short-term money market and debt instruments that mature in up to 91 days such as treasury bills, commercial paper and certificates of deposit.
The five schemes are JM High Liquidity, Baroda Pioneer Liquid, Reliance Liquidity Fund
Principal Cash Mgmt, LIC MF Liquid

Gilt Funds: Funds which invest only in government securities of different maturities with virtually no default risk.
The five schemes are UTI Gilt Advantage LTP, UTI Gilt Advantage LTP PF, Birla Sun Life G Sec LP, Birla Sun Life G Sec LT, Kotak Gilt Invest PF Trust.

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