Bearish factors in the recent past have had little effect on yields, says a report by DSP Merill Lynch. While a part of this can be attributed to moderating rate hike expectations following lower inflation, bulk of the strength was on account of negligible supply.
Conducted in early April, this year, the report, based on a survey of portfolio management strategies of fund managers and chief investment officers who manage Rs949bn in assets, however, forecasts that this is set to change with the start of the borrowing programme. "We expect this to trigger yields higher," it says.
In its monthly bulletin Mutual Fund Debt Monthly, it sends out the message "remain focussed on short duration funds".
Highlights of the survey:
Views on a strong economy clearly lost flavour, with only 38 per cent (from 83 per cent last month) expecting a stronger economy. The majority (54 per cent) expect the economy to remain stable. While a minor 8 per cent expect a weaker economy (from 0 per cent last month).
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Fund managers expect stability in inflation levels (54 per cent) while only 31 per cent (from 58 per cent) now expect a rise and 15 per cent expect a decline.
Views on rupee strength showed a turnaround with 54 per cent (from 8 per cent) expecting it to depreciate and 31 per cent expecting it to appreciate. 15 per cent of the fund managers expect rupee stability, showing that views on a strong rupee were declining.
Other reports by DSP Merrill Lynch