Ganti Murthy, Head – Fixed Income, IDBI Mutual Fund says that the recent volatility has shaken the confidence of investors.
Where do you see interest rates heading?
Interest rates are going to be trading in a narrow range between (for the 10 year G-sec) 8.70 to 8.90. Movement will depend on the monetary policy review on 18th December.
What is your view on gilt funds? When should one start investing in gilt?
RBI stance is anti-inflationary. So, we don’t expect any sudden downward movement of interest rates. Thus, gilt funds may not be as attractive at this juncture.
Do you think long term bond funds will take exposure to Inflation Indexed National Savings Securities?
If you mean Inflation Indexed Bonds then a few funds have taken exposure to it. What you are referring are inflation indexed bonds for individual savers. These are meant to be for individual investors who want a real rate of return which is positive. These instruments are yet to be made available in the market.
Are you planning to launch any new products on the fixed income side?
Yes, we are discussing a few new ones.
Has the recent bout of volatility in debt funds affected inflows in debt funds?
Volatility in the past five months have affected flows. Quite a number of investors who faced losses have yet to return to mutual funds. But in the current month we have seen some of them return to liquid funds.
Is it the right time to invest in Monthly Income Plans?
If your risk profile matches that of the risk profile of MIPs then one should start investing there regardless of trying to time the market.
Which category of fixed income funds are likely to do well in 2014?
We expect Short Term Bond Funds to do well in the year 2014. As we expect RBI anti- inflationary bias to continue, we expect the long end of the curve to underperform when compared to the short end. Hence we expect short term bond funds to perform well.
Are you seeing competition from tax-free PSU bonds?
Yes, tax-free bonds floated by PSUs are offering an attractive 9% yield for 15-20 years which is appealing to a lot of HNIs. Only equity funds can offer such kind of returns. Hence, some HNIs are redeeming their investments from debt funds and investing in tax-free bonds.
