"We
believe that around 15-20% of the corpus may be parked with
liquid/liquid plus funds while the other 25-30% of the corpus may
be allocated to the duration funds," says Lakshmi Iyer, Head of
Products and Fixed Income, Kotak Mutual Fund.
In an exclusive interview with Varsha Inamdar, Lakshmi Iyer further said, "Factors like high domestic inflation number, buoyant commodity costs in Rupee terms, and the monsoon outlook continue to remain a risk ."
What is your take on the current debt market scenario?Largely, the market is operating with an optimistic bias. The fast moderating economy; calibrated OMO action by RBI; and increased FII investment support to the debt market, all, are providing buoyancy to the market sentiment. This in turn has led to the marginal steeping of the yield curve in the recent past.
However, factors like high domestic inflation number, buoyant commodity costs in Rupee terms, and the monsoon outlook continue to remain a risk. Overall, it will be the strength and interplay of these factors that will determine the market trend in future.
How do you see outlook on G-Sec, corporate bonds and short-term instruments?We believe that at the shorter end of the yield curve, the rising government expenditure, the hike in the export refinancing limit, and moderating credit offtake, may to some extent alleviate the stringent liquidity paucity observed now. This in-fact has already begun to reflect in the short term yield curve.
The long-term gilt and bond outlook is also positive. We expect that the eventual rate reversal; subsidy rationalisation; OMO action; and moderating core inflation, may lead to gradual correction in yields. While this sentiment has begun to partially reflect in the gsec, the entire play-through may take some time. The only caveat to this being the insufficient monsoon performance, which has the potential to delivery another agri-supply shock; sending the markets into a tizzy.
What investment strategy is in place at Kotak Mutual Fund considering various macro-economic headwinds?It is an arduous task to execute every view through a single strategy. Hence there is a clear need to differentiate strategies based on view, risk appetite and intended investment horizons. We have largely built in various scenarios, their likely outcome possibilities, and the proactive strategies required to meet them.
The core of the strategy is based on maintaining a relatively high quality portfolio, participating in the duration play and utilising undervalued opportunities. The fundâ™s portfolio action is an interplay of these three components, built within the framework of each fund"s own unique investment mandate and objectives.
How do you see near-term outlook on rupee? Will it continue to gain against US dollar?We believe that the rupee decline may be approaching its bottom, and after a period of consolidation, may make a move to regain some of its lost ground.
Amongst the many reasons, the 20% brent crude oil price correction implies that the total dollar demand for oil import would go down by around USD 5-6 billion in a year"s time. To add to that, the expected FII influx in the debt market may also would help alleviate currency concerns.
How do you see monetary policy outlook for FY13 given slowdown in growth and high WPI inflation?The rapid moderation in the economy, with a possible de-growth in manufacturing sector, makes the rate-reversal a matter of when, not if, provided the monsoon plays along. The core inflation is expected to slow-down gradually in absence of another supply shock. To add to that, the possibility of a reversal in the rupee trend may help bring down costs of imported commodities, esp of oil. All this may provide the necessary precursor for an onset of a more benign monetary policy in future.
Market is factoring further rate cuts in FY13. According to you what will be the likely impact of possible rate cut on bond market?We believe that while the long term gilts may react more favourably to the rate cut, the transference to the bond curve may occur over a period of time. The quantum of supply and government"s stance on reforms might be the other factors which the bond market would like to watch before reacting more robustly.
What kind of products would you advocate for people who are looking at fixed income kind of investing right now?We firstly, are staunch advocates of objectives based investment for investor. Having said that, we believe that an investor must look to apportion around 20-45% corpus in equities oriented mutual fund. This of-course is dependent on the risk-return appetite of an individual.
Of the remaining, we believe that around 15-20% of the corpus may be parked with liquid/liquid plus funds while the other 25-30% of the corpus may be allocated to the duration funds. Around 10-15% corpus allocation can also be made into the Gold funds.
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