The target maturity approach allows you to tailor your investment to your specific goals and is apt in the current interest rate environment. Target Maturity Funds with pre-defined maturity have the potential to generate better risk-adjusted returns. The yields on the short to medium end of the maturity curve in the Indian debt market appear to be favourable.

The RBI has raised policy rates cumulatively by 190 bps between April ’22 to September ’22 to combat rising inflation. This has resulted in a sharp retracement across the short end of the curve (1-3 Year segment) even as the long end of the curve remains anchored. Currently, the flat yield curve offers an ideal investment opportunity for investors with attractive yields in the 3 to 5 years segment.

State Development Loans (SDLs) are sovereign securities (bonds) issued by various State Governments to raise funds from the market at a market-determined rate using an auction mechanism. It offers negligible credit risk as securities have an implicit sovereign guarantee and higher yield than G-sec securities. Over the years, the liquidity in the secondary market for SDL has improved. A Target Maturity Index Fund investing in SDLs offers investors a good combination of predictable returns and a high-quality fixed-income portfolio. At the same time, there could be a benefit from the steep yield curve.

Axis Mutual Fund has launched Axis Nifty SDL September 2026 Debt Index Fund.   It is an open-ended Target Maturity Index Fund investing in constituents of the Nifty SDL Sep 2026 Index; A Relatively High-Interest Rate Risk and a Relatively Low Credit Risk.

Commenting on the launch of the NFO, Mr Chandresh Nigam, MD and CEO at Axis AMC, said, “We believe that the Axis Nifty SDL September 2026 Debt Index Fund will be a notable add-on to our offerings in the passive debt side. Investors can leverage the benefit of a consistent style (as the index represents a defined set of SDLs issued by State Governments) and a relatively lower risk exposure (as the index fund offers a well-defined mix of sovereign exposure by way of SDLs) in addition to lower expenses and market-linked returns. As a fund house that believes in ‘responsible investing’, we are offering investors the opportunity to invest in quality assets.”

Table 1: Details of Axis Nifty SDL September 2026 Debt Index Fund

Type An open-ended Target Maturity Index Fund investing in constituents of the Nifty SDL Sep 2026 Index; A Relatively High-Interest Rate Risk and Relatively Low Credit Risk Category Debt Index Fund
Investment Objective The scheme's investment objective is to provide investment returns corresponding to the total returns of the securities as represented by the Nifty SDL Sep 2026 Index before expenses, subject to tracking errors. However, there can be no assurance that the investment objective of the scheme will be achieved.
Min. Investment Rs 5,000 and in multiples of Re 1/- thereafter. Additional Purchase Rs 1,000/- and in multiples of Re. 1 thereafter. Face Value Rs 10/- per unit
SIP/SWP/STP Available
  • Direct
  • Regular
  • Growth
  • Income Distribution cum Capital Withdrawal (IDCW)
Entry Load Not Applicable Exit Load
  • If redeemed/switched out within 7 Days from the date of allotment – 0.25%;
  • If redeemed/switched out after 7 days of allotment – Nil
Fund Manager Mr Aditya Pagaria Benchmark Index Nifty SDL Sep 2026 Index
Issue Opens November 04, 2022 Issue Closes November 16, 2022

(Source: Scheme Information Document)  

The investment strategy for Axis Nifty SDL September 2026 Debt Index Fund will be as follows:

Axis Nifty SDL September 2026 Debt Index Fund is a passively managed index fund which will employ an investment approach designed to track the performance of the Nifty SDL Sep 2026 Index.

The scheme will follow Buy and Hold investment strategy in which the scheme will invest in state government securities, which will be held till maturity unless sold for meeting redemptions /rebalancing. The scheme shall replicate the index completely. In case the scheme is unable to replicate the index, the fund manager may invest in other issuances within limits specified and subject to conditions laid down by the SEBI circular dated May 23, 2022, as amended from time to time.

During normal circumstances, the scheme’s exposure to money market instruments will align with the asset allocation table. However, in the case of maturity of instruments in the scheme portfolio, the reinvestment will be in line with the index methodology.

Under normal circumstances, the Asset Allocation will be as under:

Table 2: Asset Allocation for Axis Nifty SDL September 2026 Debt Index Fund

Instruments Indicative Allocation (% of net assets) Risk Profile
Minimum Maximum High/Medium/Low
Debt Instruments comprising Nifty SDL Sep 2026 Index 95 100 Medium
Debt & Money Market Instruments 0 5 Low to Medium

(Source: Scheme Information Document)  

About the benchmark

The Nifty SDL Sep 2026 Index seeks to measure the performance of the portfolio of SDLs maturing between April 01, 2026, to September 30, 2026. The index represents the performance of the maturity-targeted SDL market. The index holds SDLs issued by states/UTs, maturing during the six-month period ending September 30, 2026. The index is reviewed semi-annually. The underlying index comprises of 15 SDLs of states/UTs that are selected based on the following parameters:

  • Minimum issue size of Rs 500 CR

  • Emphasis on liquidity – The index will be evaluated basis of volume and frequency of trading in underlying securities

  • Weighted basis liquidity and size of issuance to ensure portfolio liquidity

Here’s the list of constituent issuers under the Nifty SDL Sep 2026 Index as on October 31, 2022:

(Source: NSE Nifty SDL September 2026 Index)  

# Note that the index constituents will be reviewed on a semi-annual basis, and the eligible securities will be added on a semi-annual basis.

Who will manage Axis Nifty SDL September 2026 Debt Index Fund?

The designated fund manager for this scheme will be Mr Aditya Pagaria. He has completed Bachelor’s in Management Studies and Post Graduate Diploma in Business Management and has an overall experience of 14 years in the financial services industry. Prior to joining Axis AMC, he was working with ICICI Prudential Asset Management Company Ltd. (Fund Manager – Fixed Income).

At Axis Mutual Fund, Mr Pagaria currently manages Axis Treasury Advantage Fund (along with Mr Devang Shah), Axis Liquid Fund (along with Mr Devang Shah), Axis Equity Advantage Fund – Series 1 and Series 2 (along with Mr Shreyash Devalkar), Axis Banking & PSU Debt Fund, Axis Ultra Short Term Fund, Axis Overnight Fund, Axis Money Market Fund (along with Mr Devang Shah), Axis Floater Fund, Axis Gold Fund, Axis Gold ETF, and Axis Debt Index Fund – 2027 SDL.

Fund Outlook – Axis Nifty SDL September 2026 Debt Index Fund

Axis Nifty SDL September 2026 Debt Index Fund aims to track the Nifty SDL Sep 2026 Index by investing in State Development Loans (SDL), maturing between April 01, 2026, to September 30, 2026., subject to tracking errors. The fortune of this scheme will depend on the performance of the underlying index.

The underlying index holds 15 SDLs issued by different states/UTs. SDLs are one of the most liquid instruments traded in the Indian debt market, and they typically trade at a premium to comparable government securities. The scheme seeks to invest in only SDL securities with negligible credit risk and with fund managers seeking to replicate the index’s duration risk and yield profile. Investors have the option to subscribe or redeem anytime during the lifecycle of the fund. Relatively attractive yields carried by SDL securities currently at a relatively higher spread over G-Sec in medium-term maturities make it attractive with lower credit risk as compared to corporate bonds.

Although the scheme invests in government-backed securities with low credit risk, it is still prone to interest rate risks. In addition, the recent 50 basis point increase in interest rates by the RBI maintains the rising interest rate environment, which is unfavourable for debt funds. If there are adverse developments, such as a worsening geo-political scenario, rising inflation, and a massive increase in government borrowings, bond yields can go up further, and investors should be prepared for some volatility. These factors, among others, may have an adverse impact on the scheme’s performance.

Thus, Axis Nifty SDL September 2026 Debt Index Fund is suitable for investors with a moderate risk profile seeking to benefit from the current market yields. One should ensure that their investment horizon matches the fund’s portfolio duration so that one can stay invested until maturity.

This article first appeared on PersonalFN here

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