SBI Corporate Bond Fund Direct Monthly Reinvestment Inc Dist cum Cap Wdrl INF200KA1YT0

The fund maintains a conservative stance, guided by an internal mandate to invest exclusively in AAA rated corporate bonds, exceeding the regulatory requirement of 80% in AAA and AA+ instruments. To manage interest-rate risk and enhance portfolio liquidity, it tactically allocates up to 20% in sovereign securities such as G-Secs and SDLs. Duration of the fund is actively managed within a band of 1.0 to 4.5 years.

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 rating on the Process Pillar.

The fund has a higher credit quality portfolio, making it more liquid and less prone to credit risk. The fund maintains 100% of its assets in AAA rated bonds, despite having the flexibility to take some allocation in lower-rated instruments. The fund tactically allocates up to 20% in sovereign securities such as G-Secs and SDLs, used tactically to manage interest-rate exposure and maintain liquidity. Duration is actively managed within a range of 1.0 to 4.5 years, depending on the macroeconomic outlook and yield-curve dynamics.

The portfolio avoids exposure to lower-rated credits, thereby reducing the potential credit risk and volatility. It remains well-diversified across top-tier public sector issuers such as Power Grid, Indian Railway Finance, National Bank for Agriculture and Rural Development, and Rural Electrification Corporation, complemented by select high-quality private-sector names like Reliance Industries, Tata Capital, and Larsen & Toubro. Tactical cash positions are maintained periodically to preserve flexibility and enable opportunistic deployment during volatile market phases.

While the inclusion of SDLs and a few structured instruments introduces pockets of illiquidity, these exposures are small and are either held to maturity or managed with caution. The fund’s conservative security selection, emphasis on liquidity, and tight duration control help mitigate risks arising from changing market conditions. Overall, the portfolio construction reflects a cautious yet well-calibrated approach that balances credit quality, liquidity, and active interest-rate management.