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Interim budget 2024 was positive for the debt markets as the bond yields went down across curves. In fact, the debt market factored in lower-than-expected fiscal deficits and gross borrowing. Subsequently, the core inflation read at 3.7%, the lowest in the current CPI data series.
Will this trend continue in the coming month?
Let’s see what the experts Dhawal Dalal, President & CIO, Debt, Edelweiss MF, Mihir Vora, CIO, Trust MF, Prashant Pimple, CIO, Fixed Income, Baroda BNP Paribas MF and Puneet Pal, Head, Fixed Income, PGIM India MF have to say about the debt outlook for March 2024.
Dhawal Dalal, President & CIO-Debt, Edelweiss MF
- In the near-term, bonds markets are expected to stay positive mainly due to the expected beginning of a rate cut cycle
- Additionally, an increase of FPI debt inflows and attractive global rate cycles will also keep debt markets high
- 10 -yr -g sec yield is expected to be in the range of 6.5% to 6.75%
- 1-year T-Bill yields are expected to ease with gradual improvement in the banking system liquidity
Fund recommended
- Long duration fixed income funds like G-Sec funds should be considered
Mihir Vora, CIO Trust MF
- Core CPI reading is expected to be below 4% and with healthy growth numbers, no significant trigger is expected from the regulators
- Markets are also likely to experience some volatility due to swings in the US yields and continued geo-political uncertainties
- The 10-year- g-sec benchmark bond is likely to trade in the range of 7%-7.10%. The short end of the curve is expected to remain elevated as banking system liquidity continues to remain in deficit
Fund recommended
- Short term bond funds and corporate bond funds look promising
Prashant Pimple, CIO, Fixed Income, Baroda BNP Paribas MF
- Markets are expected to be driven by domestic liquidity and global rate expectations
- Domestic liquidity is expected to continue on a negative side in near future thereby keeping shorter end yields elevated
- Any improvement in liquidity parameters will change the yield curve at the shorter end initially but the current situation is expected to prevail in the near term
- We expect medium to longer end yields to be range bound influenced by global factors and resultant rate expectation
Fund recommended
- For near term, liquid and low duration funds are preferred. For others, we recommend medium to long duration products
Puneet Pal, Head-Fixed Income, PGIM India MF
- The demand supply outlook is positive after the budget
- Crude prices to remain stable
- 10 -yr- g sec is expected to hover between 6.95% to 7.10%
- Shorter end of the curve can come under pressure because of adequate supply from banks
Fund recommended
- Medium to long duration funds are more suitable such as corporate bond funds, dynamic bond funds and gilt funds
