For the past few years, the debt market is sailing through some rough waters. It is true even for debt mutual funds in particular.
They are widely regarded as “one of the safest investment modes” by investors. But it doesn’t look like the case anymore.
In 2018 IL&FS Ltd. defaulted. DHFL followed with a liquidity crisis.
What seemed like once in a blue moon event didn’t stop there.
Vodafone Idea got into debt issues; its NCDs lost their investment worthiness rating. Investors in the debt market felt the pressure. But the debt mutual funds seemed to manage it somehow. AMCs tried to steady the boat through side pocketing manoeuver.
However, the Yes Bank’s trouble and the immediate Coronavirus pandemic became the final blow. It led to Franklin Templeton India winding up 6 of its debt mutual funds.
One of the best AMCs in the world winding their debt mutual fund schemes became a grave concern.
It posed a question to the investors.
Have the debt mutual funds become as risky as equity mutual funds?
Can you invest in debt mutual funds anymore?
Or is this perceived risk just a wrong perspective?
Find out your answers in the video below: