Gilt Funds vs Corporate Bonds: Sandip Raichura at PL Capital Explains How to Invest in 2025
- 10th September 2025
- 01:00:00 PM
- 4 min read
Summary
The debate between gilt funds and corporate bonds is heating up in 2025. PL Capital’s Sandip Raichura advises against going all-in on one side. Instead, he suggests a barbell allocation across short-term debt, gilts, and corporate bonds to help protect portfolios while still delivering meaningful returns.
Mumbai | September 10 – With interest rates shifting and global volatility impacting Indian markets, many investors are asking the same question: Where should I allocate money in debt funds — gilt funds or corporate bond funds?
According to Sandip Raichura, CEO – Retail Broking & Distribution and Director at PL Capital, there is no single answer. The right approach lies in balance and understanding how each type of debt fund behaves in different conditions.
Why Debt Allocation Matters Now
Government bond yields fell sharply in recent years, giving gilt fund investors excellent returns. However, with the RBI pausing rate changes and inflation still a risk, those easy gains may not repeat.
Corporate bond funds, meanwhile, have benefitted from stronger corporate balance sheets and narrowing credit spreads. Companies across India have reduced leverage, lowering default risks and improving credit quality.
Raichura notes: “Investors must be careful not to go all-in on any one category. Both gilt and corporate bonds carry risks if concentrated too heavily.”
What is a Barbell Allocation?
Raichura recommends a barbell allocation strategy for fixed income portfolios.
A barbell allocation simply means placing money at two ends of the spectrum — short-term funds for safety and liquidity, and longer-term or higher-yield funds for returns — instead of putting everything in the middle.
This approach gives investors both stability and growth. Short-term debt cushions portfolios against rate swings, while gilt and corporate bond funds can deliver higher returns when conditions are favourable.
Sandip Raichura’s Suggested Mix
For 2025, Raichura believes investors can consider the following allocation:
- 30% in short-term bond funds — including liquid funds and short-duration funds, which are less sensitive to interest rate swings.
- 40% in gilt funds — giving exposure to government bonds, but with the caveat that investors should avoid going overweight in long-duration gilts.
- 30% in corporate bond funds — of which around 10% can be in credit risk funds, depending on risk appetite.
This diversified mix ensures that portfolios are not overexposed to one type of risk, while still leaving room for meaningful returns.
Why Debt is Both a Hedge and an Opportunity
“Debt is not just a safe parking option,” Raichura explained. “When equity markets face pressure, bond yields often soften, which benefits bondholders. That balance is essential.”
He adds that all investors should maintain 5–10% of their portfolio in liquid or short-term instruments to provide flexibility during volatile phases.
Gilt Funds vs Corporate Bond Funds
Time to Trim Exposure? Or Improve Credit Quality?
| Feature | Gilt Funds | Corporate Bond Funds |
| What they invest in | Government securities (sovereign risk, no default risk) | Debt issued by companies (credit risk varies) |
| Risk level | Low default risk, but higher interest rate risk | Higher credit risk, but stronger yields when balance sheets are healthy |
| Returns | Strong when rates fall, weaker when rates rise | Higher yields than gilts, linked to corporate spreads |
| Liquidity | Highly liquid, backed by sovereign guarantee | Depends on quality of bonds in the fund |
| Best for | Safety-focused, long-term investors | Investors open to moderate risk for better returns |
Raichura cautions: “Investors who are holding more than 50–60% in gilt funds should consider trimming exposure, especially for a 2–5 year horizon. Erratic monsoons and inflation shocks could pose risks for long-duration bonds. By contrast, corporate bond funds look stronger in 2025, with healthier balance sheets reducing default risks and improving credit quality.”
The Bottom Line
For investors debating gilt funds vs corporate bond funds, PL Capital’s guidance is clear: diversify across categories, stay balanced, and avoid concentration.
As Raichura summed up: “Debt, when used wisely, is both a shield against volatility and a tool for meaningful returns.”
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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
