Why have investors been selling g-sec funds?

Reserve Bank of India has raised the repo rate by 40 basis points and cash reserve ratio by 50 basis points. However, fixed income investors have anticipated this move well in advance. Gilt funds-mutual fund schemes investing in government securities, have seen net outflows for five months in a row till April 2022, totaling Rs 1,440 crore. When the interest rates go up, long term bonds see prices going down. Marked-to-market losses pull down the net asset values (NAV) of the schemes. The gilt funds are one of the worst hit, though there is no credit risk.

Invest in them only if your investment time frame matches with the scheme’s duration.