Mr. Nilesh Shah (CA, CWA) is the Chief Investment Officer of PruICICI Mutual Fund. He joined Prudential ICICI Mutual Fund as Chief Investment Officer in June 2004. Mr. Shah has been associated with Franklin Templeton Mutual Fund, ICICI Securities & Finance Company Limited and ICICI Ltd from 1992 onwards in various capacities.

At a time when debt funds have delivered negative returns and are being shunned by investors, Mr. Shah came up with a presentation wherein he gave debt funds a thumbs up. In an exclusive interview with Personalfn, Mr. Shah explains in detail his contrarian view.

Personalfn: Your view that investors can consider investing in debt funds in small amounts at regular intervals runs contrary to what most advisors have been telling their clients. Please share with us your rationale for the same.

Mr. Shah :  Investment in small amounts at regular intervals protects investors from short-term market volatility and this strategy has been proven to be attractive in medium to long-term. We believe that at present level of interest rates, most of the negatives have already been factored in. However, in the short term there are still uncertainties mainly because of inflation and hence we are recommending gradual entry into debt funds at this stage.

Personalfn: What is the kind of returns you expect debt and g-sec funds to generate from here onwards?

Mr. Shah :  As we believe that at present level of interest rates, most of the negatives have already been factored in; we expect debt and g-sec funds to generate positive returns in the range of medium to higher single digits from here onwards.

Personalfn: What should investors look at in this current environment in a debt scheme before committing funds to the same?

Mr. Shah :  Investors should look at fund management style of the debt scheme in terms of credit risk and interest rate risk, the fund is willing to take. Highly aggressive fund management style – as exhibited by longer maturity and duration – may provide higher returns, if the interest rate view of fund manager is corroborated. However, such style would also expose investors to higher risk in volatile market, which are prevalent now.

Personalfn: Please share with us your views on the performance of Monthly Income Plans in recent months and going forward.

Mr. Shah :  Monthly Income Plans have delivered high single digit returns in last three months because of their exposure to equity markets, which have performed well in this period. Going forward, hybrid funds like Monthly Income Plans and their variants are expected to generate medium single digit returns in line with their primary investment objective.

Personalfn: How do you see the Indian economy performing in the next couple of years?

Mr. Shah :  We believe Indian economy is on firm footing to achieve sustained economic growth. The changing demographic profile & availability of credit for pursuing consumption will lead towards long-term sustenance of growth.

Personalfn: In this environment, how should investors (those with high risk appetite and others) allocate their monies?

Mr. Shah :  Investors with moderate risk appetite and having medium term perspective should invest in income and g-sec funds at prevalent market levels. While investors with low risk appetite should invest in short-term floating rate plans.

• Time to enter debt funds? - <a data-cke-saved-href="src=" href="src=" https:="" data.personalfn.com="" images="" fixed="" income="" primer.pps"="" style="color: blue;">Download Nilesh Shah's presentation

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