Invest in dynamic bond funds to navigate impact of interest rate cycle

They outshine short-duration funds: Fund managers

The Reserve Bank of India (RBI) has raised policy rates twice since May and expectations of further rate hikes are not ruled out. Against this backdrop, fund managers are advising investors to consider investments in dynamic bond funds — mutual fund (MF) schemes that take exposure to debt securities with wide-ranging maturities.

Fund managers of such schemes alter allocations depending on their interest-rate outlook.

“After more than a 100-basis point (bp) sell-off in the bond market over the past year, the return potential of debt funds has improved significantly. We suggest investors increase allocation to dynamic bond funds in a