Best Gilt Mutual Funds to invest in India in 2017

Best-Gilt-Mutual-Funds-to-invest-in-India-in-2017-1Best Gilt Mutual Funds to invest in India in 2017

Rising economic conditions would provide enormous opportunities for growing your investment. However, when interest rates are falling, safe or fixed income options would provided less returns. Gilt Mutual Funds in India are answer for this question. Gilt Mutual Funds would provide good returns when falling interest rates. What are Gilt Mutual Funds? Which are the best Short Term Gilt Mutual funds to invest? Which are the medium to long term Gilt Mutual Funds to invest in 2017? In this article, I would provide some of the Best Gilt Mutual Funds to invest in 2017 in India.

Also Read: 10 High Risk – High Return Invesment Plans in India

What are Gilt Mutual funds in India?

Gilt Mutual Funds invest in Government securities (issued by Reserve Bank of India), corporate bonds, zero coupon bonds, treasury bills, certificate of deposits, commercial papers etc. Investment in such opportunities can be done by large institutions like mutual fund schemes, financial institutions, banks etc. Retail investors cannot invest in majority of them. These government securities or bonds have a fixed interest rate or coupon rates and they are payable annually or at maturity. These bonds are issued for a tenure of 3 to 20 years. Bond prices would typically go up when interest rate goes down and vice versa.

How Gilt mutual funds work?

When Gilt mutual funds invest in such Government securities or bonds, they would get impacted in various ways.

  • They would gain with interest rates which are paid annually or at maturity.
  • When interest rates goes down, bond prices goes up. This is due to the fact that interest rates are fixed and hence investing in such bonds would provide higher interest rates comparing to market (where interest rates have been reduced).
  • On the other hand, when interest rate goes up, bond prices go down.
  • Gilt Mutual funds would en-cash opportunities specified in point no.1 and 2 and provide higher returns compared to fixed deposits.

Also Read: Best Balanced Mutual Funds for moderate risk takers

What is the ideal tenure to invest in such Gilt Mutual funds?

There are short term Gilt Mutual funds which can be invested for 1 month to 1 year period. There are medium to long term gilt mutual funds which should be invested in a medium term period of 2 to 5 years.

When should you invest in Gilt Mutual funds?

Gilt mutual funds invest in government securities or bonds. When RBI reduces repo rate, interest rates would fall and bond prices would increases. Gilt Mutual funds which holds such bonds would get higher returns with this move.

On the other side, when RBI increases the repo rate, interest rates would increase and gilt mutual funds would suffer due to fall in bond prices.

You can invest in Gilt mutual funds when:

  • RBI has been hinting that interest rates high. In such a situation there is more likely that RBI would reduce repo rate and interest rates would fall and bond prices would increase in near future.
  • Government is planning to take steps to reduce inflation. To reduce inflation, the measures would include lowering the interest rates and bond prices would increase.
  • During economic slowdown / meltdown the way it happened in 2008. During such time, Government would come up with special packages and pump-in money to boost the economy which includes lowering the interest rates. There would be good demand for bonds and the prices for such bonds would go up.

Best Short Term Gilt Mutual Funds to invest in 2017 in India

Best Short Term Gilt Mutual Funds to invest in India in 2017-min

Also Read: Top 10 Mutual Funds from Large AMCs – Should you invest?

Best Medium to Long Term Gilt Mutual Funds to invest in 2017 in India

Best Medium to long term Gilt Mutual Funds to invest in 2017-min

Conclusion: Gilt Mutual funds are good in falling interest rates. Don’t get tempted looking at the returns of 1 year and invest. There are situations where such Gilt mutual funds have provided negative returns due to raise in interest rates (which is unlikely in near future, but cautioning). You should know when to get-in and when to get-out of such mutual funds. Invest in short term Gilt Mutual funds if you are looking for 1 month to 1 year investment and in medium to long term guilt funds if you want to invest for 2-5 years.

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Best Gilt Mutual Funds to invest in India in 2017

Suresh KP


  1. Hello Suresh Ji
    It’s a nice article but I would like to point out that when target is to reduce inflation, interest rates go up. You have mentioned it other way round..Possibly by mistake.
    Please correct me if I am wrong.

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