The aim of income funds is to provide regular and steady income to investors. Although the returns under these schemes are relatively lesser than growth as such schemes generally invest in fixed income securities like bonds, corporate debentures, Government securities and money market instruments. These types of funds are less risky compared to equity schemes.
These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country.
If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long term investors may not bother about these fluctuations.