Debt fund managers bet on shorter duration play to ride RBI easing

Fund managers expect yields to remain elevated at the longer-end of the yield curve in light of government's borrowing plans

Debt fund managers expect shorter duration schemes to be better-placed to ride Reserve Bank of India’s (RBI) move to ease policy rates, with longer duration funds vulnerable to spikes in yields given the government’s borrowing programme.

“Surplus liquidity, a dovish stance and weak growth conditions should pave the way for further rate easing in the months ahead. Given this background, we remain overweight on high grade short-term funds with duration in the 3-4 years,” said Kumaresh Ramakrishnan, chief investment officer, PGIM India Mutual Fund.

Ramakrishnan says categories such as short duration schemes, corporate bond funds and banking & PSU debt