A hybrid fund's returns depend both on the performance of the stock market and the debt market

This fund is not a pure debt fund. It is categorized as a Hybrid: Debt scheme which invests in a combination of equity as well as debt instruments. The fund typically has about 25 - 30 per cent of its assets in equity and the rest in debt investments.

A hybrid fund's returns depend both on the performance of the stock market and the debt market. The equity portion has delivered good returns in the last one year because of the stock market (Nifty) delivering a 43 per cent return. If the equity market falls, the returns for the equity part of the fund can go into negative territory.

As to the debt part of the portfolio, its NAV returns originate from two sources- the interest earned by bonds and g-secs held and capital gains or losses due to changes in bond prices in the secondary market. Thus, even the debt portion can at times suffer negative returns. When interest rates rise, bond prices in the market usually fall. This is because once higher yielding bonds become available in the market, there is less demand for older bonds.

You should also understand that the returns you have looked at are absolute returns for those periods. That is, they reflect the difference in the NAV between two dates

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