Indiabulls Gilt Fund

A fund that seeks to generate income and capital appreciation by investing predominantly in G-Secs.

Summary

Type	An open-ended gilt scheme	Benchmark Index	Crisil Gilt Index
Min. Investment: Additional purchase: SIP:	Rs.5,000 and in multiples of Rs. 1 thereafter Rs. 1,000 and in multiples of Rs. 1 thereafter Min Rs.1,000 for Monthly SIP (of minimum 12 Months); Min Rs.3,000 for Quarterly SIP (of minimum 4 quarters)	Exit Load: Expense ratio:	0.25% for exit within 1 month from the date of allotment 2.25% (estimated)
Entry Load	Nil	Face Value	Rs. 1,000
Issue Opens	December 28, 2012	Issue Closes:	January 11, 2013

Note: Net Asset Value (NAV) of the fund would be calculated separately under both the plans but the portfolios would be the same.  

Plans Offered:
A) Direct Plan: The investors opting for this plan would apply directly to Asset Management Companies (AMC) without routing their applications through distributors. The expense ratio of direct plan would be lower since no commissions will be paid to any broker.

B) Indirect Plan: Investment under this plan will be routed through brokers and will have higher expense ratio.

 

Investment Objective*

The objective of the Scheme is "to generate income and capital appreciation by investing predominantly in sovereign securities issued by Central Government (including Treasury Bills) and/or by State Government, without any restriction on the maturity of the portfolio. However, there is no assurance that the investment objective of the scheme will be realized and the scheme does not assure or guarantee any returns".

 

(Source: Scheme Information Document)

 

Is this fund for you?

Indiabulls Gilt Fund (IGF) is a gilt fund from the stable of Indiabulls Mutual Fund. Indiabull Mutual Fund is relatively a new player which was setup in March 2011. Since then the fund has predominantly launched debt oriented schemes and has a maiden equity scheme. The fund house has been managing assets in excess of Rs 2,400 crore of which more than 99% are in debt funds as per the data disclosed on November 30,2012. However, timing of launch of IGF appears to be appropriate. The fund has been launched at the time when Interest rate cycle in the economy has picked out and rates are expected to move downwards. Under falling interest rate scenario bond price tend to rally which is a positive for gilt and debt funds. Funds with longer maturities tend to benefit more.

Portfolio & Investment Strategy

Being a gilt fund, IGF will primarily invest in a diversified basket of Government Securities and Treasury Bills. The fund may invest in various State government and Central Government securities including securities which are supported by the ability to borrow from the treasury or supported only by the sovereign guarantee or of the state government or supported by central or the state government. To manage the liquidity position in the portfolio at optimal level; the fund may also invest in cash and equivalent instruments.

  Asset Allocation Pattern

Instruments	Allocation Range	Risk Profile (High / Medium / Low)
Securities created and issued by Central Government and/or State Governments including T Bills	65%-100%	Moderate
Cash & Cash Equivalent Securities, CBLO, Repos & Reverse Repos in Govt. Securities.	0%-35%	Low

(Source: Scheme Information Document)  

The fund manager will take active calls on interest rates which will not only affect the composition but also the maturity profile of the portfolio. The judgement of the fund manager on interest rate movement would be guided by various macro-economic factors such as developments in the global markets, present interest rate scenario in the domestic economy, government borrowing programme, liquidity situation in the banking system, level of inflation and returns offered by alternative investments to name a few. For the purpose of hedging and portfolio rebalancing, the fund may also take exposure to derivative instruments such as Interest Rate Swaps, Forward Rate Agreements within the permitted limits set by Regulators from time to time.

 

Fund Manager Profile

The fund will be managed by Mr.Puneet Srivastava - Fund Manager Fixed Income at Indiabulls Mutual Fund. Mr Srivastava is a commerce graduate and also has to his credit Master's degree in Business Administration. His total experience in the field of finance spans overs 15 years. Prior to joining Indiabulls Mutual Fund, Mr Srivastava was associated with Sahara Mutual Fund.

Apart from Indiabulls Gilt Fund, he is responsible for managing Indiabulls Ultra Short Term Fund, Indiabulls FMP 387 DaysMarch 2012 (1) and Indiabulls FMP 377 Days March 2012 (2).

 

Fund Outlook

Since the last week of December 2012 the bond yield on 10 year 8.15% 2022 benchmark bond has come off sharply indicating the renewed buying interest in government securities. The bond yields have fallen by nearly 20bps or 0.20% over last a few days. The limit set for Foreign Institutional Investors (FIIs) to buy into Government securities has been raised recently raised by 5 billion USD. The probable rate cut in January 2013 has been causing yields to cool off and bonds and gilts to rally. Furthermore, inflation is expected to moderate going forward.

RBI has announced its borrowing calendar for the Q4 of FY 2012-13. It has planned to auction T Bills worth Rs 1,40,000 crore and medium and long term G sec bonds worth Rs 60,000 crore. T Bills are short term in nature and usually are not used to bridge the gap in government revenues. While government is infusing liquidity into system by bond buy backs through Open Market Operations (OMOs); its borrowing calendar doesn't throw any negative surprise. This denotes that government is unlikely to overshoot its borrowing limit by a big margin.

On this backdrop where the macros are turning positive and RBI is about to make the policy stance more accommodative, gilt funds as a category is expected to do well. IGF may also follow this trend and perform in line with its category peers.

 

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