Short-duration funds suit conservative investors during pause in rate cycle

Take a tactical bet on longer-duration funds when RBI moves to a tightening stance

With the Reserve Bank of India (RBI) having hiked interest rates by 225 basis points since May this year, bond yields have moved up. The benchmark 10-year bond yield is currently at 7.29 per cent, from 6.37 per cent a year earlier.

Fund managers are of the view that there may be one more rate hike in the current cycle. “With the peak of inflation now behind us, and the projection of consumer price index (CPI)-based inflation reaching within the RBI’s comfort band by Q1FY2024, we believe the rate hike cycle is almost near its peak. The Monetary Policy Committee