Investors put money in debt mutual funds to get stable returns. The return on a debt portfolio is broken into two parts: the income which is the coupon/yield to maturity (YTM) of the underlying securities in the portfolio, and the price appreciation of securities in the portfolio. Analysing the total returns over a longer time frame, 80-85 per cent of returns is generated by YTM of the portfolio and the balance 15-20 per cent by capital appreciation. In the past, retail and HNI investors have always been inclined towards schemes that offered higher YTM. YTM is the stable part of the returns of the portfolio. The risk of a high-quality portfolio is volatility, as the underlying securities are traded frequently. However, we are seeing a shift of retail and HNI investors from credit funds to good quality portfolios this financial year. Lower GDP growth and high leverage of Indian companies have led to credit quality deterioration and security prices moving down/marked down in a … [Read more...] about Debt market’s love for G-Secs & PSU papers is here to stay
Imf debt at risk
US companies have a looming problem of their own making, and it may soon come back to crush them. According to Andrew Lapthorne, head of quantitative analysis at Societe Generale, the amount of debt that businesses have accumulated over 5- 6 years has put them on the verge of a serious crisis. “This level of borrowing in some sectors of the economy is now booming (with the risk of spinning out of control) to such an extent that we think that the build-up of debt on US nonfinancial corporate balance sheets represents one of the largest mispriced risks in terms of future market stability, downside risk and future economic growth,” Lapthorne wrote in a note to clients on Tuesday. Lapthorne’s argument is that US corporations have decided to borrow money to fuel growth larger than that warranted by economic demand. But now with the assets backing this debt starting to decline in value, the wheels are going to fall off. Lapthorne believes there has been one cause of … [Read more...] about Corporate America teetering on edge of ‘toxic’ debt crisis
NEW DELHI: India’s largest engineering and construction company, Larsen & Toubro (L&T), along with its peers has taken a big knock from the Covid-19 lockdown as work in all projects came to a grinding halt. But once India emerges out of the lockdown, the company is likely to be one of fastest gainers, say analysts. The company managed to bag multiple ‘large’ and ‘significant’ domestic and international contracts in the past one month, which has substantially fattened its order book. Among these include large orders from the Indian Army, IndianOil and the Karnataka government while several significant orders from BHEL, Hindalco, UP government and many others in various fields of engineering. As a general practice, the company does not provide the exact size of the contract, but give a price bracket. ‘Large’ contracts are valued between Rs 2,500 crore and Rs 5,000 crore and ‘significant; contracts are valued between Rs 1,000 … [Read more...] about Market is betting on this EPC player to see fastest revival post-lockdown
Franklin Templeton Mutual Fund, which closed its six debt schemes, on Thursday said the voting window for affected investors would be opened for three days starting June 9. The e-voting window would open on June 9 and close on June 11 and the unit holders' meeting through video conferencing would happen on June 12, the fund house said in notices to investors. It further asked investors, who have not registered their e-mail ID yet, to register it by June 8 as those who do not have an e-mail ID or mobile number registered with the fund house will not be able to participate in the voting process. Each unit holder is entitled to vote only once per scheme that they have invested in, irrespective of the number of units. Investors are being asked to vote as schemes can be wound up only after repaying the amount due to the unit holders. The steps to wind up the schemes include active monetisation of assets and return of the investment proceeds to the unit holders. K Fintech has been … [Read more...] about Three-day voting window to open on June 9: Franklin Templeton MF
Bonds have much more money invested in them worldwide than in equities, but don’t get the column inches they deserve. That’s because bond returns don’t appear as spectacular as those in stocks, but in stressful times, they are good bets - more so if state backed. So, the latest Bharat Bond ETF issue will likely draw investors, who should earn 150 basis points more than the yields on existing tax-free debt. Set to be launched in July, the latest Bharat Bond ETF series aims to raise Rs 14,000 crore. This tranche of mutual fund units, tapping into retail savings, is estimated to yield a tax-free return of 6.21% for people in the marginal tax bracket. Those returns easily outpace the gains from existing tax-free bonds in the secondary market, perhaps by more than 150 basis points. So, these are cool bets for high net worth individuals shifting funds from risky assets. Tax Free Bonds (AAA) are now trading at 4.65% yield-to-maturity, a gauge used to measure returns on … [Read more...] about Should you invest in Bharat Bond ETF?