SBI Short Term Debt Fund Direct Plan Weekly Reinvestment of Income Distribution cum cap INF200K01VI5

It employs a bottom-up approach combined with a top-down overlay to generate superior risk-adjusted returns. A top-down approach guides portfolio positioning around predetermined risk parameters by assessing gross domestic product/ inflation, monetary/ fiscal policy, interest rate, liquidity, yield curve, credit spread, and so on, while the intensive bottom-up credit research uses an in-house model for security selection.

The investment framework is supported by well-defined internal templates that govern credit, duration, and liquidity parameters. Credit evaluation is comprehensive, involving in-depth fundamental analysis, a proprietary issuer-tiering framework, and multilevel due diligence conducted by the credit, legal, compliance, and risk management teams. Issuers are categorized into Tier 1 to Tier 3 based on credit risk, with higher-risk names subject to more frequent reviews.

Regular inputs from the macro research team and collaboration with the equity desk enrich the investment team’s understanding of economic trends and sector dynamics. The fund has recently strengthened its process by streamlining credit approvals through a central forum, incorporating technical analysis into duration and spread views. The structured and consistent application of this process underpins the fund’s conservative credit positioning and supports retaining an Above Average Process rating.

The fund maintains a conservative, high-quality portfolio aligned with its short-duration mandate. The portfolio primarily consists of AAA and AA+ rated corporate bonds from well-established PSUs and private issuers with strong parentage. Exposure to non-AAA instruments is capped at 10% and remains below that threshold, in line with the fund's risk-averse philosophy.

The fund also allocates tactically to sovereign securities and SDLs, with maturities not exceeding three years. Recently, the fund capitalized on attractive spreads in SDLs in March 2025 and subsequently booked profits as spreads normalized. Its sovereign allocation has included positions in the 7–10 year segment to benefit from offshore inflows and curve dynamics, while active profit-booking and duration adjustments reflect a cautious stance amid evolving market risks.

Following the recent revision in the potential risk class matrix, the fund now has the flexibility to invest in non-SLR bonds with residual maturity up to 10 years, used selectively to enhance portfolio carry without compromising the risk profile. Duration is actively managed between 1 and 3 years, with recent positioning closer to the upper end, reflecting a view on potential rate cut.

The manager avoids exposure to riskier NBFCs, particularly those with high unsecured lending exposure, and raises cash levels tactically based on the short-term market outlook. The portfolio remains well-diversified, reducing mark-to-market risk and supporting liquidity during volatile periods. This consistent, quality-focused approach reinforces the fund’s appeal in the short-duration category.