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The US FOMC (Federal Open Market Committee) hiked the benchmark lending rate by 25 bps in its July meeting. In the absence of any other significant events, bond yields in the domestic market remained range bound.
With this background, what can we expect in August 2023 and which funds can we look at for creating a solid debt portfolio?
Let’s see what the experts have to say.
Anand Nevatia, Fund Manager, Trust MFSneak peek
- The Reserve Bank is likely to keep the repo rate unchanged in its upcoming meet
- Despite some volatility arising from crude prices and the net supply of government bonds, bond yields may remain range bound
- 10-year-g-sec may anchor around 7% and could increase or decrease by 10 bps depending on subsequent news and events
Top picks
- Short term funds and corporate funds along with some staggered allocation in long duration funds (gilt)
- Money market funds with 9-12 month maturity or funds having one-year maturity where the investment horizon is of about a year
Sandeep Agarwal, Senior Fund Manager - Fixed Income, Sundaram MFSneak peek
- Bond yields are likely to remain in a narrow range as RBI looks to hold the repo rate in the forthcoming policy
- However, higher crude prices along with seasonally elevated vegetable prices are likely to keep the tone hawkish
- 10-year g-sec is expected to be in the range of 7.00-7.25% and the short end of the curve may remain range bound too
Top picks
- Actively managed short duration funds
- Ultra Short or low duration funds for an investment horizon of up to 6 months
- High quality short duration products like short duration funds, banking & PSU funds and corporate bond funds where the investment horizon is 12 months or longer
Sushil Budhia, Senior Fund Manager - Fixed Income Investments, Nippon India MFSneak peek
- The core CPI (Consumer Price Index) inflation is expected to be in the 5% range and the market is likely to seek comfort from it
- 10-year-g-sec is likely to trade between 6.90% and 7.10%
Top picks
- Ultra short category funds (money market funds, long duration debt funds, ultra short duration funds) for an investment horizon of 3-6 months
- Short term category funds (short term funds, banking and PSU funds, corporate debt funds) for a horizon of over 12 months
- Funds with higher component of AA and below rated/structured instruments for investors having a higher credit appetite
- Actively managed and/or long tenor roll down strategies (5 years and beyond) where the investment horizon is longer i.e., 2-3 years plus
