“The market had been keenly looking forward to some rationalisation in the small savings…”
Mar 01, 2005

Author: PersonalFN Content & Research Team

Mr. Rajiv Anand is the Head-Investments, Standard Chartered Mutual Fund. He worked in HSBC's treasury department for 4 years and was also associated with Standard Chartered Grindlays Bank for 3 years, before finally shifting to Standard Chartered Mutual Fund

In an exclusive interview with Personalfn, Mr. Anand shared his views on the budget, its impact on the debt markets and how retail investors should position themselves going forward.

Personalfn: How do you rate the Budget on a scale of 1 to 10 (with 10 being highest)

Mr. Anand : I would rate the Budget as a 5.

Personalfn: What are the 3 budget proposals you found critical from the perspective of the economy?

Mr. Anand : The proposed SPV for funding infrastructure investments is a significant development as is the proposal to selectively use the country's forex reserves for such funding. The proposed investments for urban renewal and road development outlay, as well as the proposal to ask PSU banks to up farm credit are all significant for the real economy.

Personalfn: What is the one thing that is missing from the budget that you wished had been tackled?

Mr. Anand : The market had been keenly looking forward to some rationalisation in the small savings scheme. Some move in this direction would have been desirable.

Personalfn: How do you see bond yields reacting to the budget?

Mr. Anand : Bond markets had 2 chief expectations from the budget: one, a borrowing programme consistent with FRBM requirements and two, some rationalisation of small savings. Markets have been disappointed on both these counts. Also, there was some expectation that corporate debt investment ceiling for FIIs would be enhanced. This also remained unfulfilled. As a result the 10-year has sold off almost 10 basis points to 6.55% levels.

Personalfn: How do you find the interest rate scenario unfolding over the short term and long term?

Mr. Anand : With a projected gross borrowing programme of Rs 139,466 crores in the fiscal ahead, it is clear that the market will see a steady supply of government bonds throughout the year. This will exert pressure on interest rates from April onwards. However, the pressure might be limited given that the market has already factored in rising offshore interest rates and that inflation is expected to remain around 5%. The amount of liquidity that is allowed to remain in the system may also be key to interest rates.

Personalfn: Your views on inflation going forward?

Mr. Anand : Inflation is expected to average 5% going forward. It is apparent from recent statements that it remains very high on the policy makers' agenda and fiscal and monetary policies may be geared to address this on an ongoing basis.

Personalfn: What is your advice to the debt fund investor right now?

Mr. Anand : Debt fund investors should continue to invest based on an overall portfolio diversification model. Accrual schemes like cash and floating rate schemes should find a significant representation in the overall portfolio. Fixed Maturity Plans (FMPs) are another option that provides investors with fairly predictable returns over a defined time-frame. Over and above these, investors may also look at selective exposure to mark-to-market schemes after having defined their respective risk appetites and target investment horizons.