Several mutual funds were light on debt ahead of the monetary policy review on Oct. 6 but with yields surging post-policy, many decided to add positions, Sandeep Yadav, head of fixed income at DSP Mutual Fund said.
“These positions are mostly for medium-term, and from that perspective, Indian bonds at current levels seem to be a good buy.”
The Reserve Bank of India in its policy announced plans to sell bonds via auctions to absorb liquidity, which led to a spike in yields and they have stayed elevated since then.
Funds net bought bonds worth more than 103 billion rupees ($1.24 billion) in October so far, compared to an average monthly purchase of 68 billion rupees in August-September, data from Clearing Corp of India showed.
“Benchmark yield is seen in the 7.32%-7.42% band, and mutual funds have added, but still some amount of tactical positioning is possible. This is also a good time to add positions gradually,” said Dhawal Dalal, chief investment officer – fixed income at Edelweiss Asset Management. Fund managers, however, do not expect any incremental spikes in yields, and are not worried about the impact of the expected 500 billion rupees worth of bond sales by the central bank. “Since OMO (open market operation) sales would suck out liquidity, I think the RBI would conduct them only when there is a permanent infusion of liquidity in terms of foreign purchases,” Edelweiss Asset Management’s Dalal said.
Sandeep Bagla, CEO at Trust Mutual Fund said yields in India are close to their peak, with inflation declining, lower net debt supply in the second half of fiscal, and expected foreign buying due to the inclusion in JPMorgan’s emerging market debt index. ($1 = 83.2300 Indian rupees)
(Reporting by Dharamraj Dhutia; editing by Eileen Soreng)
