Gilt mutual fund

Tue, 12 May 2026 00:00:00 +0000

A gilt mutual fund in India is an open-ended debt scheme that invests a minimum of 80% of its total assets in government securities (G-Secs) across maturities, under SEBI ’s October 2017 scheme categorisation circular. The term “gilt” is borrowed from the British market, where government bonds were historically printed on gilt-edged paper. In India, gilt funds hold predominantly Central Government Securities (CG-Secs) and, to a lesser extent, State Development Loans (SDLs). Gilt funds carry zero credit risk (sovereign backing) but carry high interest rate risk due to the long average maturity of government securities portfolios.

Modified duration in debt mutual funds

Tue, 12 May 2026 00:00:00 +0000

Modified duration is a measure of the price sensitivity of a fixed-income instrument (or a debt mutual fund’s portfolio) to a change in interest rates (yield). It quantifies the approximate percentage change in bond price (or fund NAV) for a 1 percentage point (100 basis points) parallel shift in the yield curve. Modified duration is the primary interest rate risk metric disclosed in Indian debt mutual fund factsheets.

A debt fund with a modified duration of 5 years will see its NAV fall by approximately 5 per cent if yields rise by 1 percentage point, and rise by approximately 5 per cent if yields fall by 1 percentage point. This makes modified duration the single most important number for assessing interest rate risk in a debt fund.

Interest Rate Risk on WebNotes

Gilt mutual fund

Modified duration in debt mutual funds