Risks of investing in MF schemes: #2 Interest rate risk
Thursday, July 6, 2017, 6:06 PM
A debt MF scheme majorly invests in debt instruments such as bonds, debentures, government securities,etc. Therefore, upward or downward movement in interest-rates impact the prices of these debt instruments. So, if central bank reduces interest-rates, the bond prices move up, and vice-versa. When bond-prices move up, the NAV of the debt mutual fund goes up, and when bond-prices decline, the NAV too declines.