Top India fund manager bets on short-term bonds
One of India’s biggest debt fund managers is taking a contrarian bet on short-duration bonds, arguing that the central bank won’t roll back its rate hikes anytime soon.
One of India’s biggest debt fund managers is taking a contrarian bet on short-duration bonds, arguing that the central bank won’t roll back its rate hikes anytime soon.
ICICI Prudential Asset Management Co. Ltd., with 2 trillion rupees ($24 billion) of debt under management as of February, is counting on the Reserve Bank of India to remain on an extended pause after it wraps up its hiking cycle soon. RBI has raised its benchmark rate by 250 basis points to 6.5% since May 2022.
INTERVIEW
“There is no significant benefit to invest in longer-duration assets at this point of time as RBI is expected to remain in a long pause and is not expected to cut rates,” Manish Banthia, deputy chief investment officer for debt at ICICI Prudential Asset, said in an interview.
That contrasts with others such as Nomura Holdings Inc., which expects the monetary authority to cut rates by 50 basis points this year, with the first easing in the fourth quarter. Nomura isn’t alone: Goldman Sachs Group Inc. predicts that the RBI will reduce rates this year as well, prompting market players to add longer-duration bonds to their portfolios.
ICICI's Contrary Strategy from Other MFs
A number of managers, including UTI Asset Management Co., HDFC Asset Management Co. and Axis Asset Management Co., have recently launched long-duration bond funds on the presumption that the RBI is close to the end of its hiking cycle.
Yet ICICI’s Banthia is known for his contrary approach. Last year, he was bullish on floating rate bonds at a time when most shunned them because of their lack of liquidity. Now he says that larger returns for investors “will come from accrual income and therefore one will have to concentrate on higher accrual as a strategy and not necessarily higher duration.”
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