S&P downgrade could hit income funds - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

S&P downgrade could hit income funds

Aug 8, 2001

Standard & Poor, (S&P) has downgraded India’s rating to BBB– (negative) from BBB (stable). This could have an adverse impact on income funds in the short term. According to reports appearing in leading business dailies, S&P cited the financial scams as one of the factors that influenced the downgrading apart from the widening fiscal deficit, sharp increase in government debt and failure to privatise government companies.

PNB DEBT FUND (G) 13.9 0.3% 0.7% 10.0% 20.2% 16.6%
KP INC BUILD G 17.2 0.3% 1.2% 9.6% 18.4% 14.0%
IDBI PRI DEP BOND G 11.8 0.3% 1.3% 9.1% 18.2% 18.0%
K BOND WHOLESALE G 12.7 0.3% 1.0% 9.0% 17.4% 14.6%
DSP ML BOND G 17.1 0.3% 1.1% 8.7% 17.1% 13.2%
ZURICH HIGH INT G 17.1 0.4% 1.2% 8.7% 16.6% 13.1%
K BOND-DEP G 12.5 0.2% 0.9% 8.7% 16.6% 13.7%
KP CHILD ASSET 14.9 0.2% 1.0% 7.2% 16.3% 14.6%
PRU ICICI INC G 14.7 0.3% 1.1% 8.2% 16.3% 13.3%
TEMPLETON INC G 17.8 0.2% 0.9% 8.0% 16.2% 13.9%
(Returns over 12 months are annualised)

The move could have a depressing effect on bond prices in the short term. This looks more likely when one considers that bonds are witnessing a ‘bull run’ so to speak. However, newspaper reports carried comments from State Bank of India (SBI), Bank of India (BoI) and ICICI to the effect that the impact from the downgrade will be marginal as the country’s financial health was by and large sound and there is no concern big enough to merit a downgrade.

However, there is a perception and then there is the reality and there is no way to be sure what will dominate over the coming days. In the short term, there could be a decline in bond prices as sentiment normally takes over in moments like this one. If bond prices do fall, then debt and gilt fund net asset values (NAVs) could witness a decline. But income funds are for long-term investors in which case the rough must be taken with the smooth.

Equitymaster requests your view! Post a comment on "S&P downgrade could hit income funds". Click here!


More Views on News

Sorry! There are no related views on news for this company/sector.

Most Popular

4 Stocks to Make Your Portfolio Immune to the Second Covid Wave (Profit Hunter)

Apr 6, 2021

Rather than predicting the market, successful investing is more about preparing well and placing your bets accordingly.

If the Market Falls, I Will Do This... (Fast Profits Daily)

Apr 1, 2021

What should you do if the market falls? In this video, I'll tell you what I will do.

The Indian Real Estate Party Has Just Begun (Profit Hunter)

Apr 1, 2021

A favourable demand supply scenario makes a strong case for real estate prices.

India: Recovery Stalled by Vaccine Games? (The Honest Truth)

Apr 13, 2021

Ajit Dayal on how India's vaccine strategy will impact the markets.

The Dilemma of Investing in Bharti Airtel Views On News (Views On News)

Apr 1, 2021

Rahul Shah on whether Bharti Airtel will emerge as the next big thing in the Indian stock market


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms