High portfolio yields to make debt funds an attractive option in 2023

Investors could also get the benefit of capital gains this year

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Investors with a six-month to one-year horizon may opt for a low-duration fund. Those with a one- to three-year horizon may opt for short-duration debt funds and corporate bond funds.

Karthik Jerome

4 min read Last Updated : Jan 03 2023 | 10:43 PM IST

Most categories of debt funds offered low single-digit returns in 2022. The outlook for 2023, however, is brighter. Besides gaining from higher portfolio yields, investors could also get the benefit of capital gains in 2023.

Low returns in 2022

Supply disruptions caused by the Russia-Ukraine war led to commodity, including crude, prices rising sharply. A lot of pent-up demand came in as economies opened up. Supply and demand pressures combined to drive inflation up. Central banks across the globe, including the Reserve Bank of India (RBI), responded by raising interest rates rapidly.

“The effective overnight lending rate, which stood at

Topics : Inflation Debt Funds Capital Gains Investors corporate bonds Interest rate hike

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