Listen to this article
Inflation remained the key concern for India as the retail inflation or consumer price index (CPI) hovered around 7.5% due to rising food prices. This coupled with high inflation in US markets increased 10-year-g-sec yield to 7.25% in August.
Further, the money market rates went up to 7% but eventually ended in comfortable zone. How will these factors impact debt funds in September? Let’s hear what the experts have to say:
Akhil Mittal, Senior Fund Manager – Fixed Income, Tata Mutual Fund
Near term outlook
- With no near-term positive trigger around the corner, markets will remain range bound and interest rates, especially at shorter end will react to liquidity
- 10 yr -g-sec benchmark is likely to be around 7.15-7.25%
- Liquidity is expected to remain neutral for near term
Fund recommendation
- For longer term investors, long duration funds make more sense as globally as we are at end of rate hike cycle and yields could start downward journey
- Investors with less appetite for volatility but more than 1 year of investment horizon should look at short term funds, corporate bond fund, banking & PSU funds
Mahendra Kumar Jajoo, CIO - Fixed Income, Mirae Asset MF
Near term outlook
- The inflation is on higher side but RBI will not be able to cut rates in near term so markets are likely to remain range bound
- RBI also hinted that it will want to keep moderate liquidity in line with current policy. With upcoming festival months, a drain of cash expected from the banking system so liquidity is going to be tight
- 10-y- g-sec yield may move between 7.20% and 7.30%, money market rate may remain high. 3-month treasury bills are likely to be in the range of 6.80%- 6.90% and certificates of deposits (CD) range is expected to be around 7%
Fund recommendation
- Target maturity funds with maturity of 5-7 years are suitable for long terms investors. Investors with short term horizon can invest in low duration funds
Parijat Agrawal, Head- Fixed Income, Union MF
Near term outlook
- Tight monetary concerns are expected to reduce demand-driven inflationary pressures
- As significant amount of Rs 2,000 notes in circulation have returned to the banking system, the liquidity and bond markets are likely to remain buoyant
- The 10-year g-sec is expected to trade in the range of 7.10 to 7.30 in the near term
Fund recommendation
- All debt funds are attractive at this juncture because of higher absolute yields and possibility of mark-to-market gains
Rahul Pal, CIO – Fixed Income, Mahindra Manulife MF
Near term outlook
- A consolidated phase with a range bound market rates is our expectation for India rates market in the near term
- The markets will seek cues from the movement of agri commodities (predominately pulses) as a sustained price increase in agri commodities potentially can lead to a generalisation of retail inflation
- The benchmark 10-year India rates are likely to move in the 6.75 -7.40%
Fund recommendation
- Investors with short term horizon can invest in liquid, ultra short term and low duration funds. For investors with investment horizon of more than 1-year, short term and dynamic bond funds look good as they continue to have a healthy carry with a possible benefit of capital gains
