Debt Funds: An Investor’s Guide ETMarkets: Amid Bond Market Rotation, Which Debt Funds Should You Invest In?

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Welcome to the ETMarkets Investor’s Guide, a show about asset classes, market trends and investment opportunities. This is Bhaskar Dutta.

While the stock market has been extremely choppy over the past few weeks, bond markets have also seen a fair share of volatile moves, largely driven by soaring inflation and RBI’s frantic attempts to tame it.

The only direct impact of the rise in bond yields over the past few months is the negative impact on the net asset value (NAV) of mutual funds. We have already seen releases in the month of May because of this.

ETMarkets’ Shubham Raj sat down with Marzban Irani, CIO – Debt, LIC Mutual Fund, to decode the events on Mint Street and their impact on bond markets.

The money manager thinks RBI could eventually keep rates in the 5.5-6% range. He also thinks floating rate bonds are good investment ideas, but for a mutual fund manager, low liquidity can be a problem. He also spoke, among other things, about government finances.

To listen!

Q. What is the terminal repo rate you expect and when can it happen?

Q. Given that RBI has given inflation projections assuming Oil is at $105/barrel, is there a risk that it will exceed the projection as Crude holds at $120/barrel ?

Q. RBI reiterated its commitment to reduce cash. What is the outlook for short term bonds, say under 5 years, which are more sensitive to liquidity conditions?

Q. The government has increased the fertilizer subsidy. Could this lead to fiscal slippages and therefore more borrowing?

Q. Rising yields are bad news for bond investors, but is there a safe corner? Which end of the yield curve would you advise investors to choose right now?

Q. Are floating rate notes a good investment idea right now?

Thank you Shubham and Mr. Irani for a very intriguing conversation.

That’s all in this week’s special podcast. Keep checking this space for more interesting content and take the time to follow our market podcasts twice a day. Stay safe and have a nice weekend!

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