The Reserve Bank of India (RBI) on 7th August 2019, Wednesday moved for an unconventional repo rate cut by 35 basis points, the first of such magnitude by the central bank, to combat falling economic growth, also insisting that banks must pass on the benefits to their customers.
Aditya Birla Sun Life AMC
Impact of past rate cuts is being gradually transmitted to the real economy. Long term sovereign bonds have noticed a significant rally as a result of past rate cuts and we expect corporate bonds to catch up and thus 1-3 year AAA corporate bonds are looking attractive on a risk-reward basis.
Investor with a short term horizon may consider Ultra Short-Term space. An investor with longer horizon could consider Aditya Birla Sun Life Corporate Bond Fund and Aditya Birla Sun Life Banking & PSU Debt Fund. Existing investors of credit funds are advised to STAY PUT as the resolution to the credit issues are turning constructive and insight.
Kotak Mutual Fund
“Rate cut cycle is not fully over which means there still is light at the end of tunnel as far as bond yield curve is concerned. Investors should start elongating their maturity profile when making allocations to fixed income funds. In terms of credit, the extreme paranoia surrounding credit seems quite exaggerated. While there will be some small distortions still coming along, bulk of the pain points seem behind us.
Hence, a combination of non-liquid strategies for short term investment horizons with a top-up of strategies around dynamic funds and credit risk funds with an investment horizon of at least 3 years is the recommended way forward.”, said Lakshmi Iyer, CIO Debt, Kotak Asset Management Company.
Mirae Asset Management Company
“With the recent cut in repo rates, we expect dynamic bond funds and short-term funds to do well. Investors with long term investment horizon and appetite for volatility should consider dynamic bond funds while conservative investors with medium-term time horizon should look at short term debt funds” says Mahendra Jajoo, Head – Fixed Income, Mirae AMC