Gilt funds see inflows for fourth consecutive month

NEW DELHI: Gilt funds, dedicated mutual fund schemes investing in government securities, see inflows for fourth consecutive month ending December 2012. According to AMFI data release, gilt funds as a category has seen inflows of Rs 985 crore in December.

In last four months ended December 31 gilt funds have seen net inflows of Rs 3048 crore. However year to date net inflows stand at Rs 2551 crore, thanks to some net outflows in the first half of the financial year 2012-13.

The investors are keen to benefit from the falling interest rates. The yield on 10 year benchmark government bond quotes around 7.88% today, compared to 8.23% as on August 31, 2012.

Market participants are betting on a possible cut in key interest rates in the monetary policy review on January 29. As interest rates fall, bond prices go up thus offering capital gains to investors.

"Interest rates are expected to soften further. You should invest in gilt funds to benefit from falling interest rates without taking credit risk," says Anup Bhaiya, managing director, Money Honey Financial Services. Medium and long term gilt funds have given 10.2% in last one year, says Value Research, a mutual fund tracking entity.

Across 40 gilt funds investments worth Rs 6500 crore are managed as on December 31.