Comments
Amandeep Chopra, Group President and Head of Fixed Income, UTI MF, feels that gilt fund returns are likely to be less spectacular in the year ahead compared with last year. He also advises investors to take exposure to dynamic bond funds rather than pure gilt funds, in a conversation with Business Line.
Gilt funds have managed a return of 15 per cent plus in the last one year. What returns can one expect in the year ahead?
Given the high level of uncertainty in the interest rate outlook, and lower expectations of rate action by the RBI, the returns from gilt funds could be in the mid single digit levels.
Has the recent depreciation in the rupee reduced hopes of strong interest rate cuts over the next one year? What quantum of rate cut is already factored into the 10-year G-Sec prices?
Yes, the rupee depreciation has reduced expectations of rate cuts over the next one year.
While inflation and growth may trend lower, the priority for the RBI currently is the external account and funding of CAD, at 7.56 per cent. The 10-year is no longer discounting any rate cuts at all and is close to the April levels, before the May 3 rate cut.
Do you think FIIs will pull out of the debt markets further because of the weakening rupee?
Yes, currency weakness and changes in the liquidity (QE) stance taken by the Fed will reverse some of the flows we saw from the FIIs, which were largely built upon stable rupee and higher rupee yields.
Will dynamic bond funds serve retail investors vis-à-vis gilt schemes in the foreseeable future?
Yes, in the light of volatility and significant shifts in the trends impacting interest rates, a fund with some degree of flexibility in duration and asset allocation may benefit investors.
Will FMPs return to favour?
Yes, as the duration benefits decline in view of volatility and shift in the interest rate outlook, products offering a high visibility for returns and no marked-to-market component should become popular. Even the nominal yields are more attractive than they were a month ago.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.