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FSM Debt Outlook - February 2011
February 8, 2011

Outlook on the debt market

Author : iFAST Research Team

Untitled Document

The sentiment in the bond market remained weak during January 2011 as the market anticipated negative outcomes from the inflation announcement as well as from the Central Bank’s policy action at the Third Quarter Review Meeting that was to be held on 25 Jan, 2011. Furthermore, RBI made it quite clear at the review meet that the main concern for the economy is the rising inflation, which means that there will be more rate hikes in the coming months. Fundsupermart  Research Team views that this continuous increase in interest rates will definitely impact the demand in the real economy and will lead to a moderation of GDP growth in Fiscal Year (FY) 2011-12.

In the month of February, the bond market will be keenly watching the Union Budget for FY2011-12 to know:

  1. the government’s fiscal deficit target
  2. the borrowing programme outlined for FY2011-12
  3. the disinvestment plans

We are of the view that all these factors along with RBI’s stance on inflation will decide the direction of the bond market in the coming year. 

In this scenario, on account of the rising interest rates and the tight liquidity situation, we advise:


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 offer document/scheme additional information/scheme information document. 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 in the website.


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