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In a big relief to markets which is reeling under pressure due to tariff announcements, RBI has cut the repo rate by 25 bps to 6% with immediate effect.
Further, the central bank has changed its policy stance from ‘neutral’ to accommodative indicating more rate cuts could happen.
However, RBI has reduced its GDP growth forecast to 6.5% from 6.7% and revised CPI inflation to 4% from 4.2%.
Murthy Nagarajan, Head-Fixed Income, Tata Asset Management said that investors may consider investing in duration products to take advantage of the fall in yields in the coming months. Gilt fund, corporate bonds and short-term bond fund may be part of core portfolio to take advantage of fall in yields. For accruals, investors may look to invest in money market and ultra short term bond funds.
Sandeep Bagla, CEO, TRUST Mutual Fund said that RBI is now unequivocal in its support of domestic growth and confident that inflation will move towards its desired rate of 4%. “I expect the curve to steepen with the shorter end of the curve benefitting more. Investors should stick to short duration funds, which offer a good risk reward trade off."
