Axis Mutual Fund: Seizing Opportunities in State G-Secs, Credit Accruals, Tax-Efficient Funds

• Devang Shah, Head of Fixed Income at Axis Mutual Fund, identifies state government securities (SGS) as a top opportunity due to their wide yield gap over central government bonds (70-90 bps premium).
• SGS offer 7.25%-7.50% yields, surpassing central government bonds (6.45%-6.50%) and AAA-rated corporate bonds (7.15%-7.20%), while remaining secure with RBI settlements.
• Shah recommends Gilt funds with significant SGS exposure and portfolio durations of three to seven years to capitalize on these tactical opportunities.
• He also highlights accrual opportunities in AA-rated corporate bonds, offering 75-100 bps higher yields than AAA bonds, suitable for investors taking calibrated credit risks.
• Aditya Pagaria, Senior Fund Manager, emphasizes Income Plus Arbitrage Funds for tax efficiency, offering 12.5% taxation after two years, making them attractive post-tax compared to traditional debt funds or FDs.

Why It Matters: Axis Mutual Fund sees strong opportunities in high-yielding state G-Secs, AA-rated corporate bonds, and tax-efficient arbitrage funds.