8/23/2023 0 Comments Gylt story explainedThe net asset value (NAV) of the gilt fund drops sharply during times of an increasing interest rate regime.In case of Debt category funds, the interest rate risk is the highest risk associated with the fund. Gilt funds primarily suffer from an interest rate risk.Since the money is invested with the government, these funds are said to carry minimal risk.Unlike Corporate bond funds, Gilt funds are the most liquid instruments as they don’t carry credit risk.Gilt funds and underlying securities are traded in the secondary markets, the prices vary according to the current interest rates.As the bonds and securities issued by the government bear sovereign guarantee, such securities are completely safe.As we mentioned above, Gilt Funds solely invest in Government instruments having varying maturities, since the Government securities are of various tenures.While in March 2020, almost 99% of the allocation is in Government securities.In March-2017, there was 92% allocation for the Government securities.So, if we compare the current asset allocation of the Gilt funds with the historical asset allocation,.According to the SEBI mandate, Gilt Funds have to invest minimum 80% investments in the Long-term Government Securities. Thus, there is no Equity Risk associated with the stock market as such.
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