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FSM Debt Outlook For May 2012 May 14, 2012
Outlook on the debt market for May 2012
Author : iFAST Research Team


 FSM Debt Outlook for May 2012

The 10-year G-Sec yield was very volatile for the month of April 2012. It was mainly due to the rate cut implemented by the Reserve Bank of India (RBI) in the month. It started rising from 8.57% level on April 01 2012 and touched 8.70% on April 09 2012. There was a policy rate cut on April 17 2012 due to which the yields on 10-year G-Sec came down to 8.44% on April 18 2012. This was the lowest yield, which was recorded in the month and from then it again went up to 8.71% due to the worries on borrowing programme for the first half of the financial year. By the end of the month, it closed at 8.71% recording an increase of 14 basis point on a month-on-month basis.

The inflation for the month of March 2012 came down to 6.89% on a year-on-year basis as compared to 6.95% for the previous month of February 2012. After cutting the CRR rate in January and March 2012, the Reserve Bank of India (RBI) surprisingly reduced Repo Rate by 50 basis points, whereas it kept CRR unchanged in its Annual Monetary Policy Review meeting.

The unexpected 50 bps rate cut by RBI reflected the central bank’s concern over the lower growth trend and as well as possible shift of focus from inflation to economic growth. However, it indicated that further rate cut will not be forthcoming due to upside risks to inflation.

We would like to continue advising our investors to invest in Short-Term Debt Funds as they are expected to give higher returns as compared to other categories.

debt_out_may2012

In the current scenario, we would like to advise that:

  • Investors with a time horizon between 18-24 months and those who wants to play the duration game should go for Dynamic Bond Funds. The Recommended Fund in this category includes Birla Sun Life Dynamic Bond Fund.

Disclaimer: iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual funds of any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or be materially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any mutual fund. No investment decision should be taken without first viewing a mutual fund's scheme information document including statement of additional information. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, and legal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative of the future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. Please read our disclaimer on the website.Please read our disclaimer in the website. Risk Factors: Mutual funds, like securities investments, are subject to market risks and there is no guarantee against loss in the Scheme or that the Scheme’s objectives will be achieved. As with any investment in securities, the NAV of the Units issued under the Scheme can go up or down depending on various factors and forces affecting capital markets. Past performance of the Sponsor/the AMC/the Mutual Fund does not indicate the future performance of the Scheme. The name of the Scheme does not in any manner indicate the quality of the Scheme, its future prospects or returns. Please read the Statement of Additional Information and Scheme Information Document carefully before investing.



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