Axis Money IQ Knowledge Nugget - 191

Is rising inflation favourable for your debt fund returns?

Rising inflation can be a daunting prospect, causing many to fear for their financial stability. But fear not, dear reader, for we are here to tell you that rising inflation is not necessarily bad for your debt fund returns. It can even be beneficial in some cases!

First things first, let's define our main terms. In layman's terms, inflation is when the cost of living goes up and your money’s purchasing power declines with time. While inflation can lead the RBI, the central bank of India, to increase interest rates, causing a decrease in bond prices, which could impact debt fund returns, it's not always a lose-lose situation.

Debt funds are those mutual funds that invest your money in "fixed-interest" bonds that our government and corporations back. These funds can provide investors with a steady stream of income in the form of interest payments and capital gains from the appreciation of the bonds they hold. However, these funds are also subject to taxes on their income.

As a wise investor, you may be wondering if there is a method to protect your savings against the ravages of inflation and rising taxes. Well, how about using one to lessen the other? One way for investors to reduce their tax liability on returns from debt funds is through indexation.?

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Statutory Details:?Axis Mutual Fund has been established as a Trust under the Indian Trust Act 1882, sponsored by Axis Bank Ltd. (liability restricted to ?1 Lakh).?Trustee:?Axis Mutual Fund Trustee Ltd.?Investment Manager:?Axis Asset Management Co. Ltd. (the AMC)?Risk Factors:?Axis Bank Ltd. Is not liable or responsible for any loss or shortfall resulting from the operation of the scheme.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.