MUTUAL FUNDS

We expect RBI to maintain status quo on key rates <
27-May-14   14:06 Hrs IST

Bekxy Kuriakose
In an interview with Capital Market, Bekxy Kuriakose, Head - Fixed Income, Principal Mutual Fund said, Invest in a mix of corporate bonds and CD/CPs with a tactical exposure to short to medium tenor gilts.

Excerpts:

1. What are your views on fixed income market? How have the yields moved and which direction you see them moving in near to mid-term?

After rising in early April, bond yields have fallen sharply and staged a sizeable rally. Currently the ten year benchmark is around 8.75-8.78% range. We expect the ten year benchmark to trade in a range of 8.60-8.90% in the near term.

2. What is your strategy for short term funds?

Invest in a mix of corporate bonds and CD/CPs with a tactical exposure to short to medium tenor gilts. Currently Modified duration of our short term fund ranges from 1.25 to 1.75.

3. FIIs have shown good interest in the market? Will this continue post-election results?

If the new government starts taking decisive steps towards kick starting growth and controlling inflation, FII inflows into Indian markets can continue its current robust pace.

4. What reforms you expect for curtailing fiscal deficit?

Rationalization of subsidies, disinvestment programme to meet or exceed targeted levels in the near term. In the medium to long term, initiatives to improve growth can lead to increase in tax revenues.

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

We expect RBI to maintain status quo on key rates.

6. What are your Union Budget 2014-15 expectations?

We expect government to maintain the gross borrowing programme as per interim budget levels. Gold import restrictions may be rationalized.

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

At current juncture given the evolving fundamentals and RBI stance we are maintaining moderate duration in our long term funds (neither too aggressive nor too conservative).

 8. What is your advice to the investors?

Stay invested and ride through volatility. Maintain asset allocation pattern as per risk appetite. Post event one can review the portfolio and make changes if necessary.

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