Crisil GiltSDL target maturity fund
Opportunity to earn High Tax free Return in Fixed Maturity Gilt/SDL Target Maturity Fund
Dear Investor, 7th June 2022
- Are you investing in Fixed deposit?
- Do you invest into Fixed deposit for more than three years maturity?
If yes, we present you a better investment option:
RBI, has recently raised the Repo rate by 40 bps taking it to 4.40%. It is widely believed that RBI in next 6- 12 months’ time will raise the interest rate by another 110 bps thereby taking the repo rate upto 5.50% minimum.
The current 10 years Gsec yield is approximately 7.50%, and we believe the given macro-economic scenario, it would top out at 8.00% yield. Since last 18 to 24 months, we were not in favor of investing into long term debt fund (refer note dated 16th May 2020).We now believe that, in next 6 months, time would be conducive to invest into debt fund once again.
The current market situation gives a very good opportunity for an investor to earn a handsome post tax return without taking any risk. We believe that the following investment is best suited for:
- IDEALLY SUITED FOR: Individuals/companies investing in Fixed deposit
- DURATION : 3 years to 5 Years
- EXPECTED RETURN: Post Tax 6%+
A brief illustration is attached herewith:
NOTE:
- All AAA rated companies give approx 6.50% for 5 years in Fixed deposit currently. We have added 100 bps return to it since we anticipate 100 bps rate increase further for the purpose of showing fair calculation.
- Tax on Fixed deposit assumed at 30% at highest tax bracket.
- LTCG on debt fund is 20% post-indexation.
We believe that the current bond market situation gives a very good opportunity for long-term debt or Fixed Deposit investors to invest funds for 4 or 5 years and earn risk free return of 6% + per annum.
Please call for any further clarification.
Warm Regards,
Samrendra Tibarewalla, CFPCM
PS: You are the best manager of your money. Please take informed decisions only.
Disclaimer : The author in no way will be held responsible for losses incurred on the basis of above re commendations. The investors are advised to take independent decisions after verifying all facts.
FAQ: Crisil GiltSDL Target Maturity Fund
Q1: What is a Crisil GiltSDL Target Maturity Fund?
A Crisil GiltSDL Target Maturity Fund is a type of fixed maturity investment that focuses on government securities (G-Secs) and State Development Loans (SDLs). It offers investors an opportunity to earn high, tax-free returns over a fixed period. This investment is particularly appealing during times when the Reserve Bank of India (RBI) adjusts the repo rate, influencing the yield on government securities.
Q2: Why consider Crisil GiltSDL Target Maturity Fund over Fixed Deposits?
With the recent hike in the repo rate by the RBI, the yield on 10-year government securities has become more attractive, currently standing at approximately 7.40 to 7.50%. Considering the tax advantages and expected returns, investing in a Crisil GiltSDL Target Maturity Fund could offer better post-tax returns than traditional fixed deposits, especially for investments with a maturity of more than three years.
Q3: What are the expected returns from Crisil GiltSDL Target Maturity Fund?
The fund targets to offer a post-tax return of over 6% per annum. This projection is based on the current and expected macroeconomic scenario where the 10-year government security yield may top out at around 8.00%. These returns are considered risk-free, assuming the investor holds onto the fund until its maturity.
Q4: Who should invest in Crisil GiltSDL Target Maturity Fund?
This fund is ideally suited for individuals or companies that traditionally invest in fixed deposits and are looking for higher, tax-efficient returns. It is most beneficial for investments with a duration of 4 to 5 years, offering a solid alternative for long-term debt or fixed deposit investors seeking risk-free annual returns exceeding 6%.
Q5: How does the recent RBI rate hike affect Crisil GiltSDL Target Maturity Fund investments?
The RBI’s recent decision to increase the repo rate by 50 basis points to 5.90%, with expectations of a further increase, creates a favorable environment for investing in debt funds like the Crisil GiltSDL Target Maturity Fund. As the yield on 10-year G-Secs is expected to stabilize around 7.50% to 8.00%, now is considered an opportune time to invest in such funds, with the potential for higher yields in the near future.