As the equity markets continue to be riddled with risks, the latest rage in the mutual funds market is debt. With a shift in the perception of the investors, the debt fund market seems to be all set for a turnaround.Mutual funds market in India is still in its nascent stage. Though in the backdrop of the booming stock markets in the first half of Y2K, equity funds caught the fancy of the investors, the debt funds continued to be the poorer cousins of their equity counterparts. The fate of the debt mutual funds over the past couple of years had been dwindling between good times and the bad ones. However after the global equity markets tumbled to touch their all time lows, it was evident the equity funds had no other option but to lie low for the time being. Investors already reeling from a sharp decline in the value of the equity funds are disillusioned and are turning to safer havens for their investments. Debt funds provide investors with relatively stable returns by investing in various types of debt instruments. Moreover, the investors can choose the appropriate scheme to suit their requirements.

Signals of a lower interest rate regime on small saving schemes and the reduced level of dividend tax payable on debt mutual fund schemes form the recipe that has made the debt schemes more attractive on a relative scale. Debt funds have regained their luster and have once again started sprinting. The new proposals are bound to impact every facet of the debt mutual funds- right from the asset base to the investor preference for different schemes and the investment strategy of the funds themselves.

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