Where do we expect interest rates by March 2023 and what should you own?

8 Oct 2022

The Monetary Policy Committee of the Reserve Bank of India raised interest rates by 50 basis points last month, taking it to 5.90%.* This was the fourth consecutive rate hike by the Indian central bank.

This move has been in line with that of central banks globally, including the US Federal Reserve, which have been raising rates to rein in inflation.

What now?

The markets are currently discounting a rate of 4.25-4.50% in the US, said Abhishek Bisen, a fund manager for debt at Kotak Mahindra Mutual Fund, while discussing the outlook for October.

And consequently, it would be fair to assume that the repo rate in India could rise to 6.25-6.50% by March 2023, he said. 

There could be a long pause on interest rates after that, he said.

Given that the RBI continues to focus on withdrawal of accommodation, liquidity in the banking system is expected to remain relatively tight.

A flattening yield curve is likely to remain the theme as the short end of the yield curve is rising more than that of the long end of the curve, Bisen said, and in such a situation, floating rate bonds are among the best asset class to own.

Investors must now consider moving from liquid funds to those in short and short to medium category, Bisen said.

 

 


 

 

*Source: rbi.org.in

This article is for information purposes only. The information provided herein is derived from public sources, believed to be from reliable sources. However, no representation or warranty, express or implied, is provided in relation to the fairness, accuracy, correctness, completeness or reliability of the information, opinions or conclusions expressed herein. Views expressed herein involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied herein. Kotak Mahindra Mutual Fund/ Kotak AMC is not indicating or guaranteeing returns on any investments. Past performance may or may not be sustained in future. Readers should seek professional advice before making any investment-related decisions and alone shall be responsible for any decision taken.

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© Kotak Mutual Fund.2022
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
© Kotak Mutual Fund.2022
Mutual fund investments are subject to market risks, read all scheme related documents carefully.