NFO review: SBI Debt Fund Series C – 29 (366 Days), a short term fixed income option
The fund is suitable for investors who wish to invest in a product having low volatility and high return predictability for a short tenure of 1 year
SBI Mutual Fund’s NFO “SBI Debt Fund Series C – 29 (366 Days)” opened on 14th November, 2018 and will be available for subscription till 19th November, 2018. This is a Fixed Maturity Plan (FMP). Fixed Maturity Plan or Fixed Term Plan (FTP) is one of the simplest products offered by the mutual funds.
FMPs typically invest in debt and money market instruments whose maturity is less than or equal to their tenure. These products run accrual strategy wherein the underlying instruments are held till maturity.
SBI Debt Fund Series C – 29 (366 Days) is benchmarked against CRISIL Short Term Bond Index. The index has a YTM of 8.66% and runs modified duration of 1.77 Yrs. The fund will be managed by Ms Ranjana Gupta who has over 21 yrs of experience in Capital markets and is managing all SBI Debt Fund series launched since 5th October, 2016.
The intended portfolio allocation suggests that this FMP will invest all its assets in highest rated instruments. There will be no investment in corporate bonds having credit rating below AAA.
| Intended Portfolio Allocation | ||||||
|
Instruments
|
Credit Rating | |||||
| AAA | A1+ | AA | A | BB | NA | |
| CDs | – | 0-5% | – | – | – | – |
| CPs | – | 20-25% | – | – | – | – |
| NCDs including securitized debt | 75-80% | – | – | – | – | – |
| GOI dated securities including State Gvt Securities | – | – | – | – | – | – |
| CBLO, Treasury Bills, Cash Management Bills & reverse repos | – | – | – | – | – | – |
Tax Impact
This FMP’s tenure is less than 3 years making it ineligible for indexation benefits and hence will attract Short Term Capital Gains Tax (STCG). Investor will be taxed as per his/her individual tax bracket (that could be as high as 30%) on all gains made in the FMP.
Even without the indexation benefits, an FMP is still a better investment choice compared with 1 yr bank FD. An FMP provides higher post tax returns by virtue of higher yields of the underlying instruments. Investment in corporate bonds via mutual fund route will always have some alpha over the FD rates offered by banks (banks also invest the money that you put in FDs into corporate bonds to generate higher returns than the interest rate offered to you).
| Key Features | |
| Investment Objective | The scheme endeavours to provide regular income and capital growth with limited interest rate risk to the investors through investments in a portfolio comprising of debt instruments such as Government Securities, PSU & Corporate Bonds and Money Market Instruments maturing on or before the maturity of the scheme. There is no assurance or guarantee that the scheme’s objective will be achieved. |
| Plans & Options | Direct Plan: Growth & Dividend (Payout & Transfer Facility) Regular Plan: Growth & Dividend (Payout & Transfer Facility) Growth will be the default option & dividend payout will be default facility |
| Min Investment Amount | Rs. 5,000/- and in multiples of Re. 1/- thereafter |
The fund is suitable for investors who wish to invest in a product having low volatility and high return predictability for a short tenure of 1 year.
Disclaimer: The article is only for informational purposes and is not an advice. Investors are requested to consult their financial, tax and other advisors before taking any investment decision.
Priyanka Bharati
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