Are HDFC Nifty G-Sec Dec 2026 and July 2031 Index Funds Worth Including In Your Debt Portfolio?
Mitali Dhoke
Nov 04, 2022
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Investors would find it comforting to have some consistency in their portfolio, given that interest rates are gradually rising. As a result, they try to invest in opportunities that would provide such stability. Target Maturity Index Funds have less interest rate risk than traditional bond funds if held until maturity, which helps sustain the rising interest rate scenario. Target Maturity Funds with pre-defined maturity have the potential to generate better risk-adjusted returns.
Investors' interest in Target Maturity Funds has significantly increased due to a rally in yields of domestic fixed-income instruments, a regulatory push to passive debt fund management, and the predictable nature of returns. The comfort of having their investments in government securities and top-rated papers adds to the allure of Target Maturity Funds.
These schemes potentially give higher returns than fixed deposit rates prevailing today, along with the additional benefit of indexation if held for more than three years. Since the beginning of the year, yields have increased across the curve as the RBI has tightened policy in line with other central banks worldwide to curb inflation. Investors can take advantage of these relatively high yields by investing in Target Maturity Funds.
HDFC Mutual Fund has launched two Target Maturity Funds - HDFC Nifty G-Sec Dec 2026 Index Fund and HDFC Nifty G-Sec July 2031 Index Fund. Both are open-ended target maturity schemes replicating/tracking Nifty G-Sec Dec 2026 Index and Nifty G-Sec July 2031 Index. A Relatively High Interest Rate Risk and Relatively Low Credit Risk. These funds could be a good fit for investors under the current high interest-rate scenario as they provide the opportunity to invest at current market yields.
Table 1: Details for HDFC Nifty G-Sec Dec 2026 Index Fund
| Type |
An open-ended target maturity scheme replicating/tracking Nifty G-sec Dec 2026 Index. A Relatively High-Interest Rate Risk and Relatively Low Credit Risk. |
Category |
Debt Index Fund |
| Investment Objective |
To generate returns that are commensurate (before fees and expenses) with the performance of the Nifty G-sec Dec 2026 Index (Underlying Index), subject to tracking difference. There is no assurance that the investment objective of the scheme will be realised. |
| Min. Investment |
Rs 100 and in multiples of Re 1/- thereafter. Additional Purchase Rs 100/- and in multiples of Re. 1 thereafter. |
Face Value |
Rs 10/- per unit |
| SIP/SWP/STP |
Available |
|
|
| Plans |
|
Options |
|
| Entry Load |
Not Applicable |
Exit Load |
Nil |
| Fund Manager |
Mr Vikash Agarwal |
Benchmark Index |
Nifty G-sec Dec 2026 Index. |
| Issue Opens |
November 01, 2022 |
Issue Closes |
November 09, 2022 |
(Source: Scheme Information Document)
Table 2: Details for HDFC Nifty G-Sec July 2031 Index Fund
| Type |
An open-ended target maturity scheme replicating/tracking Nifty G-Sec July 2031 Index. A Relatively High Interest Rate Risk and Relatively Low Credit Risk. |
Category |
Debt Index Fund |
| Investment Objective |
To generate commensurate returns (before fees and expenses) with the performance of the Nifty G-Sec July 2031 Index (Underlying Index), subject to tracking difference. There is no assurance that the investment objective of the scheme will be realised. |
| Min. Investment |
Rs 100 and in multiples of Re 1/- thereafter. Additional Purchase Rs 100/- and in multiples of Re. 1 thereafter. |
Face Value |
Rs 10/- per unit |
| SIP/SWP/STP |
Available |
|
|
| Plans |
|
Options |
|
| Entry Load |
Not Applicable |
Exit Load |
Nil |
| Fund Manager |
Mr Vikash Agarwal |
Benchmark Index |
Nifty G-Sec July 2031 Index. |
| Issue Opens |
November 01, 2022 |
Issue Closes |
November 09, 2022 |
(Source: Scheme Information Document)
The investment strategy for HDFC Nifty G-Sec Dec 2026 Index Fund and HDFC Nifty G-Sec July 2031 Index Fund will be as follows:
Both schemes are Target Maturity Date Index Funds. They will be passively managed, which will employ an investment approach designed to track the performance of the underlying indices, subject to tracking errors.
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Generally, these schemes will follow the Buy and Hold investment strategy in which existing government securities will be held till maturity unless sold to meet redemptions requirement or to rebalance the portfolio. These schemes will not try to beat the market it tracks and do not seek temporary defensive positions when the market decline or appear overvalued.
The scheme's exposure to money market instruments will align with the asset allocation table. However, in the case of maturity of securities in the scheme portfolio, the reinvestment will be in line with the index methodology.
Under normal circumstances, the Asset Allocation will be as under:
Table 3: Asset Allocation for HDFC Nifty G-Sec Dec 2026 Index Fund and HDFC Nifty G-Sec July 2031 Index Fund
| Instruments |
Indicative Allocation (% of net assets) |
Risk Profile |
| Minimum |
Maximum |
High/Medium/Low |
| Government Securities/SDL, TREPS on Government Securities/Treasury bills |
95 |
100 |
Low to Medium |
| Money Market Instruments and Units of liquid and debt mutual fund schemes |
0 |
5 |
Low to Medium |
(Source: Scheme Information Document)
About the benchmark
The Nifty G-sec Dec 2026 Index seeks to measure the performance of the portfolio of Government securities (G-Secs) maturing during six month period ending December 31, 2026. From the eligible universe, the three most liquid G-Secs maturing during the six-month period ending December 31, 2026, based on the aggregate trading value during the three-month period prior to June 30, 2022, are selected to be part of the index.
The Nifty G-Sec Jul 2031 Index seeks to measure the performance of the portfolio of Government securities (G-Secs) maturing during the twelve-month period ending July 31, 2031. From the eligible universe, the three most liquid G-Secs maturing during the twelve-month period ending July 31, 2031, based on the aggregate trading value during the three-month period prior to June 15, 2022, are selected to be part of the index.
Here's the list of constituent issuers under the Nifty G-sec Dec 2026 Index and Nifty G-Sec Jul 2031 Index:
(Source: HDFC Nifty G-Sec Dec 2026 and July 2031 Index Fund PPT)
Note that the index constituents will be reviewed on a semi-annual basis, and the eligible securities will be added on a semi-annual basis.
Who will manage HDFC Nifty G-Sec Dec 2026 and July 2031 Index Funds?
The designated fund manager for both schemes will be Mr Vikash Agarwal. He is a Chartered Accountant, B.Com. (Hons.) graduate, and holds MS (Finance) degree from ICFAI. Collectively he has over 16 years of experience in dealing in fixed-income products, of which more than 13.5 years in debt dealing and investment and more than 1 year in Forex dealing and research. Prior to joining HDFC AMC, he has been associated with Larsen & Toubro Limited as an Executive.
At HDFC Mutual Fund, Mr Agarwal currently manages HDFC Floating Rate Debt Fund (co-managed scheme), HDFC Money Market Fund, HDFC Fixed Maturity Plan - Series 46, and HDFC Ultra Short Term Debt Fund (co-managed scheme).
Fund Outlook - HDFC Nifty G-Sec Dec 2026 Index Fund and HDFC Nifty G-Sec July 2031 Index Fund
HDFC Nifty G-Sec Dec 2026 Index Fund and HDFC Nifty G-Sec July 2031 Index Fund are passively managed debt index funds that aim to replicate the performance of the Nifty G-Sec Dec 2026 and Nifty G-Sec July 2031, subject to tracking error. The schemes offer safety with relatively low credit risk by investments in G-Sec securities.
The schemes will invest in government-backed securities with a pre-defined maturity period. If investors hold these funds till maturity, they can expect to earn the indicative yields. The yield-to-maturity (YTM) metric indicates the expected return. The charm of these funds lies in the predictability of their returns. The scheme provides investors with a portfolio of quality papers with no duration risk since it follows a roll-down approach (i.e., duration risk keeps on decreasing) and offers better risk-adjusted performance and liquidity.
Although the schemes offer low credit risk at low cost, it is still prone to high debt market and interest rate risks. In addition, the recent increase in interest rates by the RBI maintains the rising interest rate environment, which is unfavourable for debt funds. If there are adverse developments, such as a worsening geo-political scenario, rising inflation, and a massive increase in government borrowings, bond yields can go up further, and investors should be prepared for some volatility in the near term. These factors, among others, may have an adverse impact on the scheme's performance.
The fortune of this scheme will depend on the performance of the underlying Indices. Thus, HDFC Nifty G-Sec Dec 2026 Index Fund and HDFC Nifty G-Sec July 2031 Index Fund is suitable for investors with moderate risk appetite seeking to invest in high-credit quality bonds with good liquidity. You can choose the Target Maturity Fund between Dec 2026 and July 2031 as per your suitability, and ensure that your investment horizon aligns with the fund's portfolio duration.
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Warm Regards,
Mitali Dhoke
Research Analyst