SEBI has tightened the investment norms for debt funds. How do you see its impact?
Now we have to diversify our portfolio. The demand for housing finance companies paper will go down. You can already see the impact in the market as many housing finance paper are on sale and their yields have gone up by five basis points.
How do you see the demand for corporate bonds at this juncture?
The major demand for corporate bonds, particularly AAA rated paper, will come from FIIs. India is a good destination for FIIs because it stands out as compared to other emerging markets.
How has been the demand to your fixed income offshore fund?
Mirae Asset Group launched two offshore funds in Korea and both these funds have seen good growth. Our corporate bond fund which was launched in May 2015 has reached Rs. 400 crore AUM now. This fund has delivered good returns because the Indian currency has been strong. The rupee has depreciated against dollar but against Korean Won we have appreciated by 4.5%. Due to the rate cut, we are flush with liquidity in the market which has also helped Korean investors get capital gains. They have got double digit returns in our bond fund. We are expecting that more investors will allocate their money in the Indian fixed income market in 2016.
What category of debt funds would you recommend investors at this juncture?
In the current scenario, investors should invest in funds having exposure to good quality paper. Investors should avoid taking credit calls. There has been a rally in global bond market and the yields have gone down by 10-12 basis points globally. The Indian fixed income market has also given good returns. There will be good triggers for duration products. So investors should opt for duration funds at this juncture.
What is your outlook for fixed income market for 2016?
This year would be better for fixed income market because everything is in our favor. For instance, inflation is falling, global commodity prices are down and there is scope for further rate cuts by RBI. Whatever problems we have are all imported and India will be immune to them because our current account deficit in under control and we have good remittances. Indian fixed income market will be one of the most attractive investment destinations for global investors. The only uncertainty is on the fiscal deficit side. The yields are not falling in line with rate cuts. So there would be demand supply mismatch in gilt paper. We can expect a rally in Indian 10-year G-sec yield post Budget. We see the 10-year G-sec yield touching 7-7.10% this year.
