In line with market expectation, RBI has reduced the repo rate by 25 bps to 6% in its monetary policy meeting today. The central bank has maintained its stance as ‘neutral’.
Subdued headline inflation numbers and concerns over growth largely influenced the central bank’s decision to cut the repo rate.
We spoke to four fund managers to understand what advice distributors should give to their clients.
All the four fund managers prefer short and medium term debt funds in the current market.
Dwijendra Srivastava, CIO Debt, Sundaram MF said that currently, short-term papers are trading at attractive yields. He said that upside risks to inflation and supply side concerns may cause some uncertainty on the longer end of the yield curve. In this scenario, investors can look at short term funds. Also, they can consider medium term funds only if they can stay put for over three years.
Mahendra Kumar Jajoo, Head - Fixed Income, Mirae Asset MF feels that there is lot of uncertainty surrounding supply absorption of long-term papers. From risk perspective, it may be better for investors to look at short-term funds.
According to Akhil Mittal, Senior Fund Manager, Tata MF, investors can look at short-term and medium term funds as they offer better risk-adjusted returns. However, investors with higher risk appetite and an ability to withstand volatility can look at long duration funds as there is potential to generate decent returns if all factors fall in place such as benign inflation and supportive currency movement.
Lakshmi Iyer, CIO (Debt), Kotak Mahindra MF said that as the bond markets had already factored in a rate cut, the response post policy was quite tepid. RBI’s dollar/rupee FX swap is likely to augur well for the fixed income markets and especially in the short to medium duration bucket.