Best and the Worst of Debt Funds: 2019

Investment in fixed income securities are often considered as boring and uninteresting, as they are less volatile than their equity counterpart and tend to generate lower returns. The year 2019 seemed to be different, as they outperformed most of the equity categories in terms of performance. Despite all the credit issues and defaults by some of the best known companies, on an average, not a single category generated negative returns in the last year. The worst category was ‘credit risk’ that generated returns of a little less than 0.43 per cent while the best return, i.e. of 12.52 per cent, was generated by ‘Gilt (10-year constant duration)’. Nonetheless, this is the category, where investors are least interested.

There are all together 16 categories under debt funds as defined by the market regulator SEBI. It has been seen that long duration funds have generated better returns due to fall in the yield. In last one year, the benchmark 10 year government bond yields have dropped by almost 90 basis points.

Average Returns of different categories of Debt MF

The following two tables show the top 5 best and worst of debt funds. You can see that best performing funds are mostly from the gilt categories while the worst are from low duration or corporate bond funds. One of the exceptions is PGIM India Ultra ST Fund, a fund from ultra-short duration category generated better returns. This is because they wrote back Rs 149 crore of dues from the Anil Ambani group firms, Reliance Business Broadcast Network Holdings (RBBNH) and Reliance Commercial Finance (RCFL), and reversed the mark down they had taken on these exposures. Hence, this gain.

Best Debt Funds in 2019

Worst of Debt Funds in 2019