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Don’t exit long duration funds, says Abhiroop Mukherjee of Motilal Oswal AMC

Short-to-medium duration funds would be the ideal space because there still are a lot of uncertainties in the market, says Abhiroop Mukherjee.

, ET Online|
Updated: Jun 06, 2017, 05.04 PM IST
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Short-to-medium duration funds would be the ideal space because there still are a lot of uncertainties in the market, says Abhiroop Mukherjee, Associate Vice President, Fixed Income, Motilal Oswal AMC while talking to Shivani Bazaz of ET.com Mutual Funds on the eve of RBI policy.

The RBI policy is tomorrow. Do you think the RBI will change its stance?
I think it is going to be a status quo. However, the data and figures show that there is a room for easing of rates. The dialogue will have to be watched out. If there is a softer dialogue from the RBI, then it can be a trigger for the market to give a direction to the interest rates.

What is happening in the market right now?
Initially (after RBI changed its monetary stance) the debt markets were slightly on the negative side but once the news settled down, there were continuous flows. These flows have been constantly prompting the yields to stay lower. The markets are going good.

When are you expecting the RBI to change its stance?
A section of the market is still expecting a rate cut but circumstances point out that the RBI will watch out for another two months before taking a call. The monsoon will also play a big part in what will happen in the markets. There is an expectation of a 96 per cent monsoon this year. I think the RBI will wait to see how things pan out.

What should the investors do at this point?
I think for new investments, short to medium duration funds would be the ideal space because there still are a lot of uncertainties in the market. We don’t know how many rate cuts we would see in this year or what would trigger the yield trajectory to go southwards. So, until there is a clear move coming our way, it will be difficult for the longer duration funds to make money.

What is your advice to the investors who are already invested in long duration funds?
The RBI policy doesn’t look like changing this month and might not change in the next month as well. But investors who have already waited for two years, they might as well just wait for another year to get the tax benefit. Also, if there is a rate cut in the coming quarter, they might take advantage of it.

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