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Baroda Pioneer AMC: Bullish On Fixed Income
June 28, 2013

This note highlights the brief discussion that we had with Alok Sahoo - Head-Fixed Income, Baroda Pioneer AMC.


Author : iFAST Research



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Baroda Pioneer Fund House, with more than 90% of the corpus concentrated into fixed income, is aggressively recommending debt funds to investors. In this scenario, we decided to meet up with Alok Sahoo, Head-Fixed Income. The interaction was aimed at getting the fund house views on the debt market and to get to know the positioning of their different debt funds.

Initially, Sahoo put down his thoughts on the direction of policy rates that he expects the Reserve Bank of India (RBI) to implement in the coming months. Sahoo is of the view that the central bank may cut rates in the month of July and this will depend upon several factors like the stabilization in currency, monsoons and lower inflation. If these factors enter the positive zone, then it will give the RBI the comfort to go ahead with a monetary easing stance.

Sahoo was very positive on the shorter end of the yield curve and is expecting the 3 to 6 month and 1 to 2 year yields to come down in July due to the demand-supply mis-match in money market papers & bonds and the favorable liquidity conditions. In this scenario, the fund manager advises investors to park their surplus into liquid, ultra-short term and short-term funds.

On the other hand, he expects the longer end of the curve to remain volatile for some more time. Overall, Sahoo expects the market to remain volatile with a bullish outlook and this is on the back of lower inflation and expectations of a rate cut. Sahoo emphasized two funds that he is bullish on for a time horizon of 12 months to 18 months.

Baroda Pioneer Dynamic Bond Fund is advised for those who trust the fund manager to play on the different parts of the yield curve depending on his views on interest rates. Sahoo believes that in this fund, alpha is generated by trading on duration and hence he actively manages this fund.

The other promising fund is Baroda Pioneer Public Sector Undertaking (PSU) Bond Fund which is tailor made for risk averse investors. The portfolio is mainly comprised of PSU bonds and PSU Bank CDs of 6 month to 3 year with no exposure into Non-Bank Financial Companies (NBFCs) and illiquid manufacturing companies. This fund is positioned as a short term bond fund with 10% exposures to long term g sec and bonds.

Finally, Sahoo concluded the discussion by saying that his current strategy is to increase the average maturity in the ultra-short term and short-term funds in light of higher yield in short end of the curve and expects investors to take positions into these categories of funds as well.

 

 

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