RBI’s recent actions of commencing its rate cut cycle, infusing liquidity and relaxing lending norms for NBFCs has provided breathing room for the fixed income market.
Avnish says its possible that this rate cut cycle can go as much as 75-100 bps (we’ve seen25 bps so far) with the next rate cut perhaps expected in June 2025.
In such a scenario, the 1-3 yr segment continues to be the sweet spot in the fixed income space – which means short duration funds and corporate bond funds can be wise choices to go with now.
Canara Robeco’s conservative hybrid fund remains true to label with its conservative credit quality stance (only AAA and gilts) and its duration (modified duration currently at 6 yrs, unlikely to take it up much more).
The fund has currently allocated 78% to debt and 22% to equity. In case regulatory changes allow this category to own 10-15% in arbitrage to take up gross equity to 35%and thus offer better tax treatment of gains, the fund will be open to utilizing this facility for investors’ benefit (if and when it happens).
Avnish is not too worried about the upcoming April 2nd deadline for US to impose reciprocal tariffs on all countries (including India). He sees this as potentially inflationary more for US than for India.