Now is a great time to invest in Indian fixed income says Saurav Ghosh. Here’s why

With fairness markets experiencing heightened volatility and international financial uncertainty, now is a great time to invest in Indian fixed income, in accordance to Saurav Ghosh, a fixed income professional and co-founder of Jiraaf. In an interplay with ET Markets, Ghosh acknowledged that he sees a sturdy alternative for buyers to lock in enticing yields forward of anticipated fee cuts by the Reserve Financial institution of India (RBI).

“Proper now is a great time to invest in Indian fixed income on condition that fairness markets are clearly highly-highly unstable. Proper now international financial markets each due to the US is clearly very-very unsure, so Indian fixed income with its stability is a great asset class to have in your funding portfolio,” he stated.

So what ought to buyers do?

Ghosh believes that buyers ought to capitalize on this window by taking publicity to longer-duration authorities securities (G-Secs) and State Growth Loans (SDLs), which provide low credit score danger and enticing yields.“Given the speed lower is anticipated, it is fairly, I’d say, opportunistic proper now to take longer period exposures in the meanwhile,” he stated.

For buyers in search of flexibility, dynamic bond funds current a wonderful alternative, as fund managers can actively modify their portfolios primarily based on evolving rate of interest developments.

For these with a reasonable danger urge for food, Ghosh recommends AAA and AA-rated company bonds with a period of 24-36 months, which he sees as a good wealth creation alternative.

“Should you lock-in charges proper now with fee cuts once more anticipated, it is a good time to take part in company bonds,” he suggested. The enchantment of those company bonds lies in the truth that credit score spreads stay barely elevated due to tight liquidity, making it a good time for buyers to enter.

On the short-term fixed income facet, Ghosh famous that cash market yields stay elevated due to liquidity constraints, making shorter-duration G-Secs and SDLs a sexy choice. He identified that RBI’s latest Rs 50,000 crore liquidity infusion via G-Sec purchases is anticipated to present some aid to short-term yields. Nevertheless, short-term yields are doubtless to keep excessive in the fast future earlier than easing after the speed cuts materialize.

The larger image: Home and international bond markets

The broader Indian bond market has been positively correlated with US 10-year Treasury yields, although the unfold between the 2 has narrowed to historic lows of 250 foundation factors (bps).

“Traditionally, the unfold between US Treasury yield and India 10-year G-Sec used to be above 350 bps, however it has now come down considerably,” Ghosh noticed.

International Portfolio Buyers (FPIs) have been withdrawing from each Indian fairness and debt markets, largely due to forex volatility. Nevertheless, FPI inflows into Indian fixed income may enhance in the close to future, particularly if the US Federal Reserve begins a fee lower cycle.

“If FPI inflows truly begin rising and the development reverses, yields are doubtless to come down with extra rising demand,” he defined. Buyers can monitor weekly FPI influx developments to time their bond market entry and maximize returns.

Ghosh additionally famous that the latest transfer by Citi to downgrade US equities and improve China to chubby may shift international funding flows towards rising markets like India. He believes that Indian fixed income markets stay enticing due to India’s fiscal self-discipline, steady forex administration by RBI, and powerful financial development prospects.

With fee cuts across the nook and enticing yields nonetheless accessible, Saurav Ghosh believes that the window to capitalize on India’s fixed-income market is now.

(Disclaimer: Suggestions, solutions, views and opinions given by the specialists are their very own. These don’t characterize the views of The Financial Instances)