Reliance Banking & PSU Debt Fund

An open-ended income scheme with the primary objective of investing in debt instruments issued by Banking & PSU entities.

Summary

Type	An Open Ended Income Scheme	Benchmark Index	Crisil Short Term Bond Fund Index
Min. investment: Additional purchase:	Rs.5, 000/- & in multiples of Re. 1 thereafter Rs 1,000 and in multiples of Re 1 thereafter	Plans:	Dividend Plan: Dividend Payout Option Dividend Re-investment Option Weekly Dividend Payout option Weekly Dividend (Reinvestment) option Monthly Dividend Payout Option Monthly Dividend Reinvestment Option Quarterly Dividend Payout Option Quarterly Dividend Reinvestment Option Growth Plan: Bonus Option
Face Value	Rs 10 per unit	Expense Ratio:	Upto 2.50%*
Entry Load	Nil	Exit Load:	Nil
Issue Opens	May 05, 2015	Issue Closes:	May 12, 2015

* Expenses charged under the said parameters shall be in line with the Regulation 52 of SEBI (MF) Regulations or such other basis as specified by SEBI from time to time.  

Investment Objective*

To generate income over short to medium term horizon through investments in debt and money market instruments of various maturities, consisting predominantly of securities issued by entities such as Banks, Public Sector Undertakings (PSUs) and Public Financial Institutions (PFIs). However, there is no assurance that the investment objective of the Scheme will be achieved.

*Source: Scheme Information Document

 

Is this fund for you?

The scheme, under normal conditions, will be managed with investments focused on debt and money market instruments consisting predominantly of securities issued by entities such as Banks, Public Sector undertakings and Public Financial Institutions (PFIs) to generate income over short to medium term horizon. The fund may also seek exposure in government securities and state development loans in order to maintain an optimum balance of yield, safety and liquidity. The fund will follow an active investment strategy within the overall mandate, depending on opportunities available at various points in time.

The scheme may invest in foreign securities upto 25% of the net assets of the scheme. It may also enter into “Repo”, “Short Selling “or such other transactions as may be allowed to mutual funds from time to time.

The scheme may also invest its net assets in derivatives like interest rate swaps, forward rate agreements and other such instruments as permitted by RBI / SEBI. Some of the debt instruments may not be listed and investments will be made through public offer or private placement or secondary market open fund.

RBPDF may, from time to time, review and modify the Scheme’s investment strategy if such changes are considered to be in the best interests of the unit holders and if market conditions and interest rate scenario warrant it.

The asset allocation which will be followed by the fund will be as under:

 

Instruments	Allocation Range (%)		Risk Profile High/Medium/Low
	Minimum	Maximum
Debt* and Money Market Instruments issued by Banks, Public Sector Undertakings (PSUs) and Public Financial Institutions (PFIs)	80	100	Medium to Low
Cash, Money Market & Debt instruments	0	20	Medium to Low

• *Including investments in securitized debt which may be upto 50% of the net assets of the scheme.
The scheme may invest in derivatives upto a maximum of 50% of its net assets. The cumulative gross exposure through debt and derivative positions should not exceed 100% of the net assets of the scheme.
The scheme may invest in foreign securities upto 25% of the net assets of the scheme.
The Fund may also enter into “Repo”, “Short Selling “or such other transactions as may be allowed to Mutual Funds from time to time.
The cumulative gross exposure through repo transactions in corporate debt securities along with debt and derivative positions will not exceed 100% of the net assets of the scheme or such other limits as may be permitted by SEBI from time to time.
The Scheme will not engage into any stock lending activity.

 

RBPDF will benchmark its performance to the Crisil Short Term Bond Fund Index, which is an index that tracks the performance of a Portfolio that mainly includes Call instruments, Commercial Paper, Government securities as also the AAA and AA rated instruments. This composition adequately represents the scheme’s strategy which aims to generate income over short to medium term horizon.

 

Fund Manager Profile

Anju Chajjer debuted with D.C. Dharewa & Co. in 1996. She joined Reliance Capital Asset Management in 2007 and manages investments for Debt Schemes. She is a B.Com graduate, and a chartered accountant.

Mr. Vivek Sharma debuted with Reliance Capital Asset Management Ltd. in 2010. He currently works as an Assistant Fund Manager (Fixed Income Investments). He is a B.E (Electronics) graduate, and a PGDBM-Finance.

Jahnvee Shah debuted with Financial Express as an Assistant at the Editors Desk in 2001. She currently works as Fund Manager (Overseas Investments for Reliance Capital Asset Management Limited). She is a MBA – Finance, and a Bachelor of Science graduate.

 

Fund Outlook

As of now, liquidity conditions in the system remain comfortable as banks have been witnessing poor credit growth but relatively high growth in deposits. Credit growth for the Financial Year (FY) 2014-15 came down sharply to 8.6% from 14.3% recorded in FY 2013-14. Credit disbursement to industry grew at a muted pace of 5.6% in FY 2014-15. Banks have been reducing interest rates on shorter maturity deposits. Average daily turnover in select money markets has been falling consistently for a month now. Very short term borrowing rates and overnight borrowing rates are below the repo rate as well as the yields on 91-days T-bills. This suggests that, markets expect no significant liquidity pressure in the foreseeable future. At present, the Government has a cash surplus balance of Rs 71,833 crore. As and when this surplus gets released in the market, liquidity conditions may improve further.

Monetary policy stance of the Reserve Bank of India (RBI) has been accommodative since last few quarters. The central bank has cut policy rates twice since the beginning of the calendar year 2015. Falling inflation and benign outlook induced RBI to cut policy rates by 50bps (in total) or by 0.50% this calendar year so far. In the first bi-monthly monetary policy for the current fiscal (FY 2015-16), RBI restated that it will continue to follow accommodative policy stance provided the banks pass on the benefits of previous rate cuts to borrowers and inflation and its outlook remains well within the acceptable limits. RBI has set an inflation target of 6.0% which is to be achieved by January 2016. Data released for the month of March 2015 shows that, at 5.17%, the retail inflation has stayed well below the upper limit set by RBI.

On this backdrop income funds focusing on short to medium tenure papers are likely to do better than those investing in long maturity papers. Therefore, if managed well, RBPDF may be able to fulfil its investment objective.

 

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