SBI MF launches inflation-indexed bond

SBI Mutual Fund on Thursday said it had launched an inflation-indexed bond fund (IIBF) offering, which is aimed at investors with a low to medium risk profile, looking at a hedge against price rise.

Under the open-ended debt scheme, SBI Mutual Fund will invest in inflation-indexed securities and actively manage a portfolio of predominantly inflation linked bonds (IIBs), it said in a statement.

"The real return is low or negative in the case of alternate avenues like fixed deposit investments, and also for representative debt indices. Inflation-indexed bonds would always provide a fixed real return, irrespective of the level," SBI MF's managing director and chief executive D K Khara said.

The IIBF would invest a minimum of 70 per cent and up to 100 per cent in Inflation Indexed Securities, and up to 30 per cent in money market instruments/units of debt and liquid mutual funds, it said.

The exposure to domestic securitised debt would be to the extent of 20 per cent of net assets, it added.

It can be noted that in order to push people looking for a hedge against inflation, and restrict investments in other non-financial avenues like gold, the Reserve Bank has been pushing the inflation indexed bonds.

Inflation has been trending down for the past few months and RBI has repeatedly stated its resolve in bringing it down further to 6 per cent by January 2016.

The SBI IIBF new fund offering opened last week and will close for initial subscription on October 31.

State Bank of India