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Debt mutual funds hope impact of CRR move to be short-term

As on Oct 31, nearly 70% of MFs' overall assets under management was in debt category, at Rs 10.75 lakh crore

Chandan Kishore Kant  |  Mumbai 

mutual funds, MF, invest, stock, shares, market
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are hoping that the redemption pressure seen after the Reserve Bank of India’s (RBI’s) sudden increase in banks' cash reserve ratio (CRR) won’t last beyond the short term.

Debt schemes, particularly liquid and money market, saw huge withdrawals from banks on Monday, after the central bank announced an incremental 100 per cent to suck out excess liquidity. The move caused a spike in yields on government securities, causing big fluctuations in the net asset values (NAVs) of debt schemes.

“Redemption pressure has eased. We expect the flows to normalise going. However, if comes out with any surprise announcements, could again be impacted,” said a chief investment officer (CIO) with a large fund house, asking not to be named.

The 10-year government security has moved this month in a wide range, between 6.19 per cent and 6.79 per cent, causing returns on several debt schemes to go haywire. Following the announcement on November 8, yields had dropped to 6.19 per cent. However, the incremental announcement saw yields spike to 6.33 per cent.

Rahul Goswami, CIO (Fixed Income) at MF, says: “This move (incremental hike) is temporary and will be reviewed on December 9. Yields might remain volatile in the near term. However, the medium-term view remains positive and we see yields settling at lower levels.”

Bond
Added Murthy Nagarajan, head of fixed income at Quantum MF: “Yields could again go down, as there are strong expectations of a rate cut. We expect 10-year yields to trade around 6.15-6.30 levels after the cut by RBI.”

After demonetisation, says Goswami, the macro dynamics have changed in favour of fixed income, with inflation expected to remain low and growth subdued. “We recommend investors stay invested in long-duration funds. New investments are recommended in dynamic duration, short duration and accrual funds,” he adds.

As on October 31, nearly 70 per cent of MFs' overall assets under management was in the debt category, at Rs 10.75 lakh crore. In liquid schemes, the assets were Rs 2.78 lakh crore; in income schemes, Rs 7.5 lakh crore.

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Debt mutual funds hope impact of CRR move to be short-term

As on Oct 31, nearly 70% of MFs' overall assets under management was in debt category, at Rs 10.75 lakh crore

As on Oct 31, nearly 70% of MFs' overall assets under management was in debt category, at Rs 10.75 lakh crore
are hoping that the redemption pressure seen after the Reserve Bank of India’s (RBI’s) sudden increase in banks' cash reserve ratio (CRR) won’t last beyond the short term.

Debt schemes, particularly liquid and money market, saw huge withdrawals from banks on Monday, after the central bank announced an incremental 100 per cent to suck out excess liquidity. The move caused a spike in yields on government securities, causing big fluctuations in the net asset values (NAVs) of debt schemes.

“Redemption pressure has eased. We expect the flows to normalise going. However, if comes out with any surprise announcements, could again be impacted,” said a chief investment officer (CIO) with a large fund house, asking not to be named.

The 10-year government security has moved this month in a wide range, between 6.19 per cent and 6.79 per cent, causing returns on several debt schemes to go haywire. Following the announcement on November 8, yields had dropped to 6.19 per cent. However, the incremental announcement saw yields spike to 6.33 per cent.

Rahul Goswami, CIO (Fixed Income) at MF, says: “This move (incremental hike) is temporary and will be reviewed on December 9. Yields might remain volatile in the near term. However, the medium-term view remains positive and we see yields settling at lower levels.”

Bond
Added Murthy Nagarajan, head of fixed income at Quantum MF: “Yields could again go down, as there are strong expectations of a rate cut. We expect 10-year yields to trade around 6.15-6.30 levels after the cut by RBI.”

After demonetisation, says Goswami, the macro dynamics have changed in favour of fixed income, with inflation expected to remain low and growth subdued. “We recommend investors stay invested in long-duration funds. New investments are recommended in dynamic duration, short duration and accrual funds,” he adds.

As on October 31, nearly 70 per cent of MFs' overall assets under management was in the debt category, at Rs 10.75 lakh crore. In liquid schemes, the assets were Rs 2.78 lakh crore; in income schemes, Rs 7.5 lakh crore.

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Business Standard
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Debt mutual funds hope impact of CRR move to be short-term

As on Oct 31, nearly 70% of MFs' overall assets under management was in debt category, at Rs 10.75 lakh crore

are hoping that the redemption pressure seen after the Reserve Bank of India’s (RBI’s) sudden increase in banks' cash reserve ratio (CRR) won’t last beyond the short term.

Debt schemes, particularly liquid and money market, saw huge withdrawals from banks on Monday, after the central bank announced an incremental 100 per cent to suck out excess liquidity. The move caused a spike in yields on government securities, causing big fluctuations in the net asset values (NAVs) of debt schemes.

“Redemption pressure has eased. We expect the flows to normalise going. However, if comes out with any surprise announcements, could again be impacted,” said a chief investment officer (CIO) with a large fund house, asking not to be named.

The 10-year government security has moved this month in a wide range, between 6.19 per cent and 6.79 per cent, causing returns on several debt schemes to go haywire. Following the announcement on November 8, yields had dropped to 6.19 per cent. However, the incremental announcement saw yields spike to 6.33 per cent.

Rahul Goswami, CIO (Fixed Income) at MF, says: “This move (incremental hike) is temporary and will be reviewed on December 9. Yields might remain volatile in the near term. However, the medium-term view remains positive and we see yields settling at lower levels.”

Bond
Added Murthy Nagarajan, head of fixed income at Quantum MF: “Yields could again go down, as there are strong expectations of a rate cut. We expect 10-year yields to trade around 6.15-6.30 levels after the cut by RBI.”

After demonetisation, says Goswami, the macro dynamics have changed in favour of fixed income, with inflation expected to remain low and growth subdued. “We recommend investors stay invested in long-duration funds. New investments are recommended in dynamic duration, short duration and accrual funds,” he adds.

As on October 31, nearly 70 per cent of MFs' overall assets under management was in the debt category, at Rs 10.75 lakh crore. In liquid schemes, the assets were Rs 2.78 lakh crore; in income schemes, Rs 7.5 lakh crore.

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Business Standard
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