Contrary to what many analysts had forecasted, RBI has kept the key policy rates unchanged.
Not only is the same repo rate to continue, but the stance of the committee also has changed from accommodative to neutral. That means the chances of rate cut in the upcoming policy reviews are quite slim.
Many experts are of the view that advisers should go with accrual strategy at this juncture.
Dwijendra Srivastava, Executive VP and CIO Debt, Sundaram AMC
By changing their stance from accommodative to neutral, the RBI might be hinting at a cycle change i.e., there is a chance that there might not be any more rate cuts in the future. It is important to note that RBI now has a dual mandate of controlling inflation and ensuring growth. Only if the growth slips too much RBI may consider further rate cuts.
Considering this, IFAs should advise their clients is to go for short duration bonds. In fact, what I would recommend is to start looking at accrual funds, which focus on higher yield. In addition, advisers can look at recommending dynamic bond funds having shorter average maturity to their clients.
Vidya Bala, Head of Mutual Fund Research, Fundsindia
Even before the monetary policy came out it had become clear that we were at end of the rate cut period. The new RBI policy only reaffirms this. Going forward it will be difficult for new investors to get returns from long duration calls.
Now the markets are ripe for accrual funds, these should be integrated into your client’s portfolio.
Lakshmi Iyer, CIO ( Debt) & Head Products, Kotak MF
We have been communicating that advisers should go with accrual strategy, as the policy review is likely to take hawkish stance going forward.
At this moment, it is better to rely on accrual strategy. Advisers should be overweight on good quality corporate bonds having chances of getting their credit rating upgraded. Ideally, they should follow 80% accrual and 20% duration.