HDFC Short Term Debt Fund

The HDFC Short Term Debt Fund focuses on building a higher quality credit portfolio through interest accruals in the invested debt and money market instruments like standing. The investment pattern in the fund is geared to achieve the objectives as the asset allocation is up to 100% low to moderate risk profile debt, including securitized debt and money market instruments. Only about 10% asset allocation may be made in moderate to high-risk profile units issued by REITI and InvITs. The actual portfolio asset allocation achieved in juxtaposition with the projected strategy is 97.39% in debt and 2.61% in others.

In the light of the above revelation, the top ten holdings in the fund are distributed with a cumulative percentage to the NAV of 50.11% as of 31 March 2021. Some of the notable names are REC Ltd. (8.58%, Reliance Industries (6.65%), SBI (6.60%), NABARD (5.51%), HDFC (5.23%), GOI (4.25%), LIC (4.18%), Vedanta Ltd. (3.29%), Invinfravit Trust (3.09%), and MTNL (2.72%).  

In terms of sector, the portfolio asset allocation is concentrated in Financial Services, Power, Construction, and Oil and Gas, comprising nearly 80% of the NAV.  

The investor can choose from the following plans and its options offered by the HDFC Short Term Debt Fund:

HDFC Short Term Debt Fund Regular

• Growth Option
• IDCW Option

HDFC Short Term Debt Fund Direct

• Growth Option
• IDCW Option

**Investors in the direct option have to buy the units from the Fund House directly and not through the distributors.

**IDCW is an acronym for Income Distribution Capital Withdrawal and has two other versions in Normal and Fortnightly implying payout and reinvestment. The Fortnightly option is executed on the 10^th and 25^th of every month.

**The default option is Growth if no option is explicitly indicated.

** Fortnightly IDCW is the default option if none is specified.

Fund Facts

Benefits of HDFC Short Term Debt Fund

The HDFC Short Term Debt Fund provides the investor with a host of benefits to ensure that a regular steady is forthcoming in short-term horizons, satisfying individual needs as an alternative to bank deposits. Let us check out some of the critical benefits listed below:

Fund Integrity

HDFC AMC is one of the foremost Fund Houses in the Indian Mutual Fund market. A combination of the brand and the investment objective in the HDFC Short Term Debt Fund ensures that the investor receives a consistent return.  A diversified portfolio with the support of debt and money market instruments ensures regular fixed income through interest accruals.

Ease of Investment

The open-ended HDFC Short Term Debt Fund is conveniently bought and sold in units at the prevailing NAV. It is unnecessary to invest in the Mutual Fund in lump-sum, but the alternative SIP is convenient for attracting small investors. The investor does not find investing in the fund daunting, especially for the simple reason that there are several convenient variations in the SIP mode.

Liquidity

The HDFC Short Term Debt Fund is an open-ended scheme that essentially means that the investor can purchase fund units, switch-in, redeem, and switch-out on every business day based on NAV prices. Fund redemption proceeds per SEBI rules must be paid within a maximum of 10 business days from the requested date. Failure to pay the proceeds within the stipulated time, a penal interest of 15% PA is payable by the Fund House. It is another matter that the proceeds are usually paid within 3 to 4 days.

Taxation

Earnings in the redemption of Mutual Funds are considered for Income Tax under the extant laws. The two application forms are:

Capital Gains

The gains accrued from the HDFC Short Term Debt Fund units sale three years from the purchase date is taxed at 20% of the gains post inflation indexation. If sold within three years, the gain is added to the investor’s income tax liability at the applicable tax slab. No tax is levied as long as the portfolio stays invested.

Dividend

Earning is added to the investor’s income for computing income tax liability at the applicable slab rate.

Fund Summary

HDFC Short Term Debt Fund Regular Plan-Growth Option

• Risk Level: Moderate
• NAV: Rs 24.852 as of 21 May 2021
• Expense Ratio: 0.76 as of 30 April 2021
• Fund Started On: 26 May 2009

HDFC Short Term Debt Fund Direct Plan-Growth Option

• Risk Level: Moderate
• NAV: Rs 25.25 as of 20 May 2021
• Expense Ratio: 0.24 as of 30 April 2021
• Fund Started On: 1 January 2013

Fund Returns Summary

HDFC Short Term Debt Fund Regular Plan-Growth Option (as of 31 March 2021)

HDFC Short Term Debt Fund Direct Plan-Growth Option (as of 31 March 2021)

Cumulative Pros and Cons Table

Fund House Details

HDFC Asset Management Company, commonly called the HDFC Mutual Fund, is a subsidiary of HDFC Limited, offering varied financial services. It was launched in 1999 as a joint venture enterprise between HDFC Limited and Standard Life Investment PLC of the UK. The company was converted through the IPO route in August 2018, with a public holding a 26.1% stake.

HDFC AMC is a premier Mutual Fund House dominating the scene with an AUM of Rs 4.1 trillion held in over 9.1 million accounts of a vast customer base comprising retail and institutional investors. They are the market leaders in Equity Oriented Mutual Fund Schemes supported by over 224 branches across India and a strong network of distributors and channel partners, including banks.

The primary stakeholders of the HDFC AMC are:

1. HDFC Limited: It is a financial conglomerate providing financial services ranging from housing, banking, life, non-life insurance, real estate, and education. Its shareholding in the HDFC AMC is 52.8%.
2. Standard Life Investments Limited: The UK based Standard Life Aberdeen Group is one of the largest asset managers in Europe operating through its subsidiary in India.  Its global presence is spread across 40 locations, including the Middle East, America, other parts of Asia, and Australia. Its   stake in the HDFC AMC is 26.9%

Who Should Invest in HDFC Short Term Debt Fund?

The primary objective of the HDFC Short Term Debt Fund is to generate income and capital appreciation on its investments with Macaulay Duration of a maximum of three years. The fund is categorized with a risk profile as moderate with investments primarily in debt and money market instruments. Investors who are not risk-averse, and at the same time, wary of market volatility have a clear interest in investing in the fund. The individuals and others who can invest in the HDFC Short Term Debt Fund are:

• Resident individuals
• Minors with the natural guardian like father and mother or the legal guardian.
• The HUF Karta.
• Partnership firms of every hue.
• Corporate Houses, Bodies of People, Registered Associations and Societies.
• Financial institutions.
• Public Sector Enterprises.
• Entities sponsored by the armed and paramilitary forces.
• Research organizations.
• Other Mutual Fund schemes.

The above list is only indicative. The investor must compulsorily consult the HDFC Short Term Debt Fund’s SID brochure for clarity.

Conclusion 

The HDFC Short Term Debt Fund provides moderate profile risk investors with the scope to earn a regular income alternative to bank deposits. Investment in the fund is backed by one of the most profitable Fund Houses with an impressive track record of delivering consistent returns in the short-term horizons. It is convenient to purchase and redeem units to address liquidity concerns in the open-ended scheme. Though the Fund House endeavours to achieve the fund objective, no return is guaranteed although the possibility of suffering losses is low.

FAQs