Is it too late to invest in debt mutual funds with rate cuts imminent

In the past year, debt mutual funds in India have become more appealing and have generated high single-digit returns after providing poor returns during 2021–2023. Investor sentiment has increased due to a number of factors, such as large FII (foreign institutional investors) inflows into Indian government bonds and the prospect of a rate drop by the Reserve Bank of India. In this article, we examine whether there is still room for debt mutual fund schemes to provide stronger returns in the future, given that the bond markets have already risen and the rate cut anticipation has already been priced in. The RBI's shift in position to give the bond markets a break On October 9, the monetary policy committee of the RBI maintained the 6.5 percent repo rate but shifted from a "withdrawal of accommodation" position to "neutral." Experts surmise that the RBI's confidence in future stable inflation is reflected in the shift in posture. This might pave the way for future monetary policy to loosen regulations. Since May 2023, the RBI has kept the repo rate at 6.5 percent after a string of rate increases. In spite of this, debt funds are doing well because of the anticipation of interest rate reductions.