Fundview: India's UTI AMC to add long-end federal bonds, short corporate bonds, executive says

UTI Asset Management

31/01/2025 07:11

By Dharamraj Dhutia
       MUMBAI, Jan 31 (Reuters) - India's UTI Asset Management
Company plans to increase its investments in the seven- to
15-year government bond segment and three- to five-year
corporate notes, following the central bank's recent liquidity
infusion and anticipated rate cuts, an executive said on Friday.
    "In government bonds, we are invested in the seven- to
15-year part of the bond yield curve, as this part is expected
to benefit from the central bank's OMO (open market operation)
purchases looking at its preference for such securities," said
Anurag Mittal, head of fixed income at the asset management
firm.
    The fund house manages assets worth around 3.5 trillion
rupees ($40.39 billion), as of December end.
    In the corporate debt space, the firm remains invested in
three- to five-year papers, as these yields could decline in
case of interest rate cuts and liquidity infusion, Mittal said,
adding the fund house is "quite comfortable" with the strategy. 
    The Reserve Bank of India will infuse around 1.50 trillion
rupees into the banking system over three weeks through debt
purchases, long-term repos and an FX swap. 
    On Thursday, the RBI bought 200 billion rupees of 2033 to
2037 maturity papers. 
    The infusion is being considered as a precursor for an
interest rate cut on Feb. 7, when the RBI will announce its
monetary policy decision. 
    Mittal expects the central bank to announce more steps to
infuse liquidity and cut repo rate by 50-75 basis points this
year.
    "Going forward, inflation should come closer to RBI's target
and growth is also slowing down. Both these factors are quite
constructive for policy easing."
    Mittal said, the central bank could opt for a temporary cut
in banks' cash reserve ratio for the next two to three months,
as a 50 bps move could release more than 1 trillion rupees.
    "I think the RBI may have to do more tranches of liquidity
infusion once the initial set is done. Especially around the
time of advance tax outflows, we may need more longer duration
variable rate repos as well as OMO purchases."
    
($1 = 86.6600 Indian rupees)

 (Reporting by Dharamraj Dhutia; Editing by Eileen Soreng)
 ((Dharamraj.Dhutia@thomsonreuters.com;))