Yields @ new lows: Anil Rego picks 3 funds to invest in now

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Below is the verbatim transcript of Rego's interview with CNBC-TV18.  

Q: Given that yields for government bonds are practically at an all time low and with interest rates beginning to come down, how should investors approach the debt mutual funds and any specific recommendations that you could give us?

A: Interest rates have come off a reasonable bit, thanks to the rate cuts by the Reserve Bank of India's Governor. Therefore, one would find that income funds are doing well at this point of time. However, over six month period the interest rate will continue to come down but I am not sure about longer term, one year or more than one year period.

So, in a scenario like this I would suggest to look at short-term income funds or even dynamic bond funds. One can look at Birla Sun Life Dynamic Bond Fund or ICICI Prudential Ultra Short Term Plan . One can also look at funds like Templeton India Short Term Income Fund .

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Caller Q: I can invest Rs 10,000 per month. How should I allocate the same? There is no specific goal at all.

A: For your age profile and the fact that you do not have any clear goals, I would think you can end up taking a higher level of risk. The best thing you could do is to start-off systematic investments into a combination of largecap and midcap funds. You could use funds like HDFC Top 200 Fund , Birla Sun Life Frontline Equity Fund , ICICI Prudential Discovery Fund and IDFC Premier Equity Fund . So, a combination of these is what you could use.

If you want to play a little safe then you could also use balanced funds like HDFC Prudence Fund and if you need some bit of liquidity, let us say about a year or so or you want to plan for liquidity in the future then you could use some of the short-term income funds that we discussed about.

So basically, you can take a high level of risk and use systematic investments.