Fundview: India's ICICI Pru Life eyes curve steepening, running 7-yr avg duration, exec says

Icici Prudential Life Insurance

05/12/2024 07:15

By Dharamraj Dhutia
       MUMBAI, Dec 5 (Reuters) - India's ICICI Prudential Life
Insurance expects Indian government bond yield curve to steepen,
and is running a weighted average duration of around seven years
in its debt portfolio, a fund manager said.
    "Within the sovereign portfolio, we prefer the liquid
10-year bond, 15-year bond and long bonds of 30-to-50-year
maturity," said Vidya Iyer, Head - Fixed Income, ICICI
Prudential Life Insurance Co.
    "Long bonds tend to do well in the last quarter of the year
as that is the period when long-term investors get decent flows
into their funds" 
    Government securities account for about 65% of Iyer's debt
portfolio, with the remaining 35% in corporate bonds of up to 5
years from a carry perspective.
    The fund house manages debt assets worth 1.65 trillion 
rupees ($19.48 billion) as of end-October.
    The insurer remains constructive on Indian bonds from a
medium- to long-term perspective and expects the 10-year
benchmark bond yield  IN067934G=CC  to ease to 6.50% by end of
March, from 6.68% on Thursday. 
 
    POLICY EXPECTATIONS
    On the Reserve Bank of India's monetary policy expectations,
Iyer said weaker growth data has opened up room for rate cuts,
but believes that the need of the hour is some sort of liquidity
infusion more than the repo rate cut.
    "We expect the RBI to cut Cash Reserve Ratio (CRR) by 50
basis points...Given the fact that we are still above the
pre-pandemic levels of 4% on CRR, the case for a CRR cut becomes
even stronger."
    Easier liquidity conditions will bring down market interest
rates even without a direct policy rate cut.
    The RBI policy decision is due on Friday. Iyer, however,
expects a 25-basis-point rate cut in February policy.
    "Given that inflation is still well above the RBI's comfort
level, we think the RBI will wait out for couple of more
readings on inflation before embarking on the rate cut cycle."

    ($1 = 84.7230 Indian rupees)

 (Reporting by Dharamraj Dhutia; Editing by Janane Venkatraman)
 ((Dharamraj.Dhutia@thomsonreuters.com;))