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The Indian debt market is set to witness a host of activities in March 2025.
As the RBI prepares for its upcoming monetary policy review and global financial conditions evolve, bond traders and institutional investors are closely watching economic indicators that could shape market movements.
Here is what the industry experts expect the debt market to look like in March 2025.
Avnish Jain, Head Fixed Income, Canara Robeco MF
In February, local factors like the Union Budget and RBI Monetary Policy (MPC) meeting had a positive impact on debt markets.
The government continued its efforts to reduce fiscal deficit, targeting 4.4% fiscal deficit (as % of GDP) for FY2026. Further, RBI MPC has cut repo rate by 25 bps after almost 5 years, which will shield debt markets from global market volatility.
As we go into March, US tariffs are likely to be main concerns for the markets. The US Fed is likely to remain in pause mode in midst of tariffs by the US on the rest of the world and assess the likely impact on growth and inflation.
Medium term outlook on debt markets is cautiously optimistic. RBI may cut rates again in April policy as growth moderates and inflation is also expected to fall to 4% target in the coming months.
Markets are likely to remain volatile in the near term as uncertainty on US tariff policy is likely to keep the US Fed wary of further rate cuts.
Fund recommendation
Money market funds like low duration and ultra short-term funds are likely to benefit from higher yields in 1–2-year AAA corporate bonds.
Deepak Agarwal, CIO- Fixed Income & Head – Products, Kotak MF
The government’s target to reduce the fiscal deficit to 4.4% and its intention to borrow money from the market will increase the gross supply of bonds in the market in 2025.
The position of Indian Rupee and its depreciating value is a major concern in the market. The RBI may take further measures to reverse the situation.
RBI has already made it clear that it will be working on better availability of liquidity in the market. Additionally, it has already induced Rs. 80,000 crore through forex.
We expect that RBI will introduce further rate cut of25 basis points in the coming months, which will enhance the attractiveness of the bonds in the Indian markets.
Fund recommendation
Low and medium duration funds are preferable.
