Fixed income
continues to remain attractive for investors
by Mr. Sudhir Agarwal, UTI MF
Bond markets and reading
of GDP data
The market has
been almost non-reactive to the GDP data. Ideally,
with such a strong number, there could have been an uptick in the yield but surprisingly the market has not been at all
reacting to the GDP data. Probably, it seems to be more focused on the global developments.
The inflation outlook going
forward over next one year period, demand-supply situation. After the GDP data
was released, it was seen that the yields were dipping by another around 10 to
12 bps and that was more of technical thing in nature and so totally
non-reactive to the GDP data in our market.
The sense is the medium term view is that with the RBI
hinting that there is neutral stance and probably that might be the end of a rate cut cycle. In that scenario,
there are chances that the 10-year G-Sec yield might probably settle somewhere
between 60-70 to maybe 1% over and above the RBI repo rates so hence
effectively maybe in the range of around 680 to 720 quarter kind of level. In
the last two days, we have seen the bond yields falling by 10-12 bps. That has
been more because of the technical factor but you know over the next 10-15 days
period we expect that to stabilize and we
expect the bond yields to again probably rise to settle at 0.75-1% in April.
From a fixed income investor’s perspective, ultimately they have to now probably make investment allocation based on their overall investment horizon.
There was
probably some bit of hot money which was also flowing into the debt funds with
a view to making some quick money but I
think still as an asset allocation that fixed income still continues to remain attractive.
We have been advising investors to put money into accrual oriented fund depending upon their investment horizon. If the investment horizon is said six months or lesser, we are telling them to put money into liquid or ultra short term category of fund.
For those investors,
who are having six months plus kind of investment horizon and maybe up to
three-four years we are advising them to seriously consider funds like short
term income fund or income opportunities funds.
So, those still continue to
offer decent yield for the investor and probably make sense for an investor to put money into these funds.
About the author..
Mr. Sudhir
Agrawal,
EVP -
Debt Fund Manager, UTI MF
Profile:
Mr. Sudhir Agrawal joined UTI
AMC in 2009 after 8 years of experience. He is a CFA Charter holder from The
CFA Institute, USA. He also holds a Post Graduate Diploma in Management and a
Masters in Commerce. He has previously worked with CARE (Credit Analysis and
Research Ltd.), Transparent Value LLC and Tata Asset Management Company Ltd in
different roles. He is presently Fund Manager for UTI Treasury Advantage Fund,
UTI Floating Rate Fund STP and UTI Short Term Income Fund.
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