MUTUAL FUNDS

Look at the Ultra short term funds and short term funds which offer a better return than long term funds<
25-Mar-14   15:21 Hrs IST

Mr. Ganti Murthy
In an interview with Capital Market, Ganti Murthy, Head- Fixed Income, IDBI Asset Management said, Our current investment strategy is to be risk averse. We have reduced durations in all our portfolios and are trading in the market.

Excerpts:

1. What are your views on fixed income market? How have the yields moved from pre forex crisis till date?

Yields have come a long way from the July Forex crisis till date. This can glimpsed from the 10 year benchmark yield which moved up from 7% in May 2013 to a peak of 9% before settling in the range of 8.70% to 8.80%. Going forward, we should see some positive movement in yields (yields falling) in the short term due to technical factors, but in the long term we should see yields only firming up. The government which comes to power in the month of May would present a full budget in the month of July 2014. This would again lead to rise in yields as the new government would resort to large borrowing. Also, going by the FOMC statement that they would resort to raising rates by 2015, there cannot be case for an alternate to rising yields.

2. What is your strategy for short term funds?

Short Term Funds are those funds which invest in securities which have an maturity of 3 years or less. Basically when an investor invests in a short term fund , they should look for high accrual than for capital gains. Accordingly, a Fund Manager for short term funds would invest in short to medium maturity securities which have a good track record and high credit rating.

3. FIIs have shown good interest in the market? Will this continue as we near elections?

FII's have invested in the Indian Market (both in debt and equity). We feel this would continue till the elections.

4. What are your expectations from the upcoming policy review?

Given that in the previous monetary policy meeting held in January, the RBI had stated that they may maintain status quo if they see a perceptible fall in the inflation numbers (both CPI and WPI) , we feel that in the coming monetary policy review meet there would be no rate actions.

5. What's your investment strategy? If the interest rates fall from here what will be your strategy for long term debt funds?

Our current investment strategy is to be risk averse. We have reduced durations in all our portfolios and are trading in the market. Since we do not expect any rate cut actions by the central bank, we have reduced durations. Any major downward movement in the yields would only be temporary and we would trade in the market to take advantage of that.

6. What is your advice to the investors as we enter the new financial year?

Look at the Ultra short term funds and short term funds which offer a better return than long term funds.

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