Short-term debt MFs likely to gain from RBI policy stance: Market players

Prices of fixed-income securities have an inverse relation with interest rates. When the latter decline, prices of fixed income securities increase and vice versa

The Reserve Bank of India (RBI) has kept the key policy rates unchanged even as some experts were predicting tinkering with the rates to rein in the surging inflation.

Market participants say the current policy stance suits short term-oriented debt mutual fund (MF) schemes. They say imminent increase in interest rates going ahead could negatively impact returns of long dated schemes more.

“RBI policy is more dovish than expected. Focus is clearly on supporting growth. Fears over inflation flare up, global changes in interest rate policy, and high commodity prices are ignored. Policy is good for short term bond funds