A rapidly increasing trade war and an escalation-focusing RBI (Reserve Bank of India) is thrusting the local fund and money managers into low-risk and shorter debt securities. Take a look at their plans and what they said about it –
Choose the 3-year segment
Mahendra Jajoo, Head of India Fixed-Income (Mirae Asset Management)
- “The most appealing segment is the three-year segment because after that there are a lot of riskiness and challenges to face.”
- The most beneficial thing about the three-year segment is that if you are to manage in a situation where you predict that the macros are somewhat risky and uncertain, but probably have ended being worse, what you think you do in that situation? I things started being worse from here, then you are not freaking out much because, at the very end of 3 years, you will get the capital back.
Being defensive is a good option
Lakshmi Iyer, Chief Investment Officer for Debt (Kotak Asset Management)
- “As there are a plenty of riskiness and uncertainties regarding policy decisions and macros, make your portfolio defensive. By being defensive, I mean purchasing two or three-year sovereign bond i.e. short-duration.”
- “Short-end of curve provides the most comfort at this point. The delta risk to take for maturities which are long-term is not equivalent to the available return.”
- She said that she suggests state bonds of the same duration rather than AAA and sovereign bonds.
Liquidity is the key
Suyash Choudhary, Head of Fixed Income (IDFC Asset Management)
- “Target on sovereign bonds and AAA bond is extremely sharp this year as does not desire illiquidity risk.”
- “Shifted to standard paper as much as possible. Want to be as much AAA as possible.
- Stop disclosure to some of the less-rated bonds in some of the portfolios between frights of refinancing shocks.
- “Government bond return curve is very precipitous until five years and then very flat after that.”
- The noted correlative value in front-end of the return curve- mostly 4 to 6 govt. bonds, which is the core excessive holding.
Accrual & liquid funds
Killol Pandya, Head of Fixed Income (Essel Finance)
- Stick to the briefest possible end of the duration curve like accrual, ultra short-term funds, and liquid.
- September-October is the month of fund cut duration. Have not included it yet.
- Wish that investors constantly move towards liquid funds else it will turn out to be a mistake.
Upmost corporate paper
R Sivakumar, Head of Fixed Income (Axis Asset Management)
- Suggests short-end bonds which are less than 5 years tenor in sovereign and also the corporate space because they provide more value. Prefers AAA-rated paper above sovereign bonds.
- Sees a more combative RBI and an upright number of rate hikes proceeding.
- Does not see any onward remarkable selloff in sovereign bonds with markets being much more stable.
Rajeev Radhakrishnan, Head of Fixed Income (SBI Mutual Funds)
- “Rates are only predicted to go up in the upcoming seven to eight months, would be properly conservative in position over a period, liquidity.”
- “Credit spreads- corporate returns vs. govt. bonds- are fixed and probably remain so in the very near term because of demand and supply issues.”
- The fund’s portfolio is suddenly changed toward shorter-maturity AA & AAA note, he said.
- Probably there will be two or three more rate hikes as per recent pricing followed by relatively long pause after that. Additional policy action is on the cards with clarity.
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