With a deteriorating domestic interest rate outlook, India's debt fund managers have cut allocation to government securities (G-secs) by nearly 140 basis points (bps) in the past quarter.
Interestingly, the reduction in exposure came just after the Reserve Bank of India (RBI) surprised market participants with an unexpected cut of 50 bps in its September review.
Prior to that, amid rising hope of quick cuts in interest rates, fund managers had been pumping money in government papers for the past year, at a pace which witnessed doubling of allocation. In a year, debt assets' overall exposure to G-Secs had touched a high of 16% in September against eight% a year before.
However, since then as the domestic and global macro economic situation started turning bearish, fund managers were quick to cut exposure. In December, they allocated 14.6% or Rs 1.32 lakh crore of debt assets to these securities, from Rs 1.41 lakh crore the previous month.
