Fundview: India's HDFC AMC positive on short-term corporate bonds, executive says

HDFC Asset Management

04/09/2025 09:09

By Dharamraj Dhutia

MUMBAI, Sept 4 (Reuters) - India's third-largest fund by assets is bullish on short-term corporate bonds as these notes offer attractive returns compared with government bonds of similar maturities, a fund manager said on Thursday.

AAA-rated corporate bond yields of three-year and five-year maturities have jumped by around 50 basis points over the last three months, while spreads with government bonds widened to 75-85 bps.

"We remain positive on corporate bonds considering the absolute levels of yields as well as above average spreads over government securities," said Anil Bamboli, senior fixed income fund manager, HDFC Asset Management Company HDFA.NS.

"The corporate bond spreads remain higher than long-term average as bond supply has also risen significantly."

The fund house managed debt worth around 2.61 trillion rupees ($29.60 billion) as on July 31.

Considering the comfortable banking system liquidity surplus and above average yield spreads, investment in schemes with duration of up to five years could be considered, especially for corporate bond-focused funds, he said.

Bamboli expects bond yields to trade with a downward bias over the medium term as slowing growth, range-bound inflation and dovish Federal Reserve commentary can provide room to the Indian central bank cut rates by 25 or 50 bps.

He believes inflation in the first quarter of the next financial year will undershoot the Reserve Bank of India's projection of 4.9% on healthy monsoon and goods and services tax rate cuts.

Indian states and federal governments will suffer an estimated
net revenue loss of around 480 billion rupees from the tax revision, but Bamboli is confident that New Delhi will meet this year's fiscal deficit target of 4.4% of GDP.

Government should be able to manage the deficit by a combination of higher duties on auto fuels and lower spending, and any shortfall could be managed via treasury bills or cash management bills, he added.

"While the current market sentiments are negative towards bonds, we believe bulk of negatives are now priced in and are reflected in current yield levels."

($1 = 88.15 Indian rupees)

 (Reporting by Dharamraj Dhutia; Editing by Harikrishnan Nair)

 ((Dharamraj.Dhutia@thomsonreuters.com;))