Below is the Quote on Today's RBI Announcement by Pankaj Pathak - Fund Manager - Fixed Income, Quantum Mutual Fund
“ The RBI is clearly alarmed by the recent economic data and the extent of damage Covid has caused to the economy. But in terms of monetary response to this disruption, the RBI look benign. Despite being worried about growth, they continue to remain inflation focused. Thus we see limitation to further decline in policy repo rate from here.
Bond markets reaction is also muted as yields are down only 5-10 basis points in response to 40 basis points cut in policy rates. Going ahead, trajectory of bond yields will depend more on the RBI’s bond buying program and potential relaxation to HTM (Held to maturity) limits for banks.
At this juncture we see very high level of uncertainty in the bond markets and for investors in debt funds it would be prudent to avoid high market risk. If at all one has appetite to tolerate near term volatility and can remain invested for longer time frame dynamic bond funds would be better alternative than long duration funds or gilt funds. “
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