Neha: How does inflation affect investment environments?
Iyer: Typically, when inflation is on the rise, interest rates need to be increased to curb further rise in inflation. Thus, inflation and interest rates are directly related, leading to higher yielding investment avenues.
Photo: Abhijit Bhatlekar / Mint
Neha: When you say short-term investment fund, what exactly does this entail?
Iyer: Short-term usually refers to, say, around six months in case of debt investing.
Singh: Quite a few short-term funds hold scrips of long-term maturities of about two to three years or so. Do you think that is right?
Iyer: As long as the average maturity of the portfolio is low, it is fine even if it holds such scrips. Some holdings are also in very short-term assets.
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Singh: Why aren’t retail investors putting money in liquid funds? The awareness seems to be rather low, isn’t it?
Iyer: Yes, you are right. Not many retail investors are aware that they can use debt schemes for varying investment horizons, hence, there is lower participation.
Singh: Do you see retail investor’s interest in your fund? Or is it largely patronized by corporate clients?
Iyer: There is a healthy mix of corporate and non-corporate clients in this fund. Recent inflows have largely been non-corporate in nature.
Neha: What risks do you see in the market as of now?
Iyer: Current risks are of high inflation leading to increase in rates by the Reserve Bank of India (RBI) and also the risk of removing excess liquidity from the system. This could hit interest rates.
Neha: How would the latest RBI decision affect me?
Iyer: The hike in interest rates would offer better opportunities in the debt space.