Current yields bolster case for longer-term India bond investments, HDFC AMC says
INDIA-FUNDS/HDFC MF:FUNDVIEW-Current yields bolster case for longer-term India bond investments, HDFC AMC says
By Dharamraj Dhutia
MUMBAI, Dec 2 (Reuters) - Indian government bond yields are "attractive," and macroeconomic indicators such as slowing growth and demand-supply dynamics are bolstering the case for longer-duration fixed income investments, an executive at India's third-largest asset manager said.
"...Given the macroeconomic factors are favourably placed, the current level of yields present an opportunity to increase duration on risk-reward adjusted basis," said Shobhit Mehrotra, head of fixed income at HDFC Asset Management.
The fund house manages assets worth around 7.6 trillion rupees ($89.8 billion) as of end-September.
India's benchmark 10-year bond yield has eased seven basis points to 6.73% since data on Friday showed economic growth slowed much more than expected in the third quarter.
Optimism over Indian bonds also emanates from comfortable external sector conditions, and likely abating of food inflation pressure post arrival of kharif (summer-sown) crops, Mehrotra said.
"Our focus remains more medium-term, and we believe that Indian yields are likely to trend lower over that horizon."
India's headline retail inflation jumped to 6.21% in October, which led to a pushback in rate easing expectations, but weaker growth has re-ignited chances of rate cuts soon.
The overnight index swap rates are pricing in 50 basis points of rate cuts by the Reserve Bank of India till April.
Mehrotra said he expects headline inflation to move closer to the RBI's medium-term target of 4% by the next financial year, helped by a favourable base effect, arrival of new kharif crops, moderating domestic growth, fading pent-up demand and benign core inflation momentum.
The RBI's monetary policy committee is set to announce its decision on Friday, with rising calls for easing in rates or liquidity, or even both.
For the time being, Mehrotra expects the central bank to adopt a wait-and-watch approach and "perhaps consider rate cuts sometime starting in February or April." ($1 = 84.6700 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Varun H K)
Catch all the Business News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
Business NewsNewsIndiaCurrent yields bolster case for longer-term India bond investments, HDFC AMC says
First Published:2 Dec 2024, 02:18 PM IST
- Top Gainers
- Top Losers
- 52 Week High