The stage is now set for a healthy bull run in bond markets over the next 9-12 months.
Shriram expects 100 bps of rate cuts in this cycle –which can commence either this December or February 25 and end in 1HY 25-26.
Expect 10 yr G-Sec yields to drop from 6.75% levels to6.25% - 6.40% range over the next 9-12 months.
The sweetest spot is 3-4 yr corporate bonds, which can see upto 100 bps of fall in yields in the same period.
Indian bonds’ inclusion in global indices has already brought in close to $20 Bn and should garner an equal amount over the coming year, maybe even higher.
Shriram believes the current spike in food inflation is seasonal, was anticipated and should settle down in the coming months.
HSBC Gilt Fund is currently running a modified duration of over 10 yrs to harness the expected fall in yields and its Corporate Bond Fund is heavily focused on the 3-4 yr segment.
Risks to the bull case could come from geo-political developments relating to the Israel conflict and its potential impact on oil prices and supply disruptions. India is however very well placed now to deal with temporary external shocks – so the impact is likely to be relatively muted for India.