By:-Mr. Anil Bamboli, Head, Fixed Income of HDFC Asset Management Company Limited (HDFC AMC).
“The Monetary Policy kept the policy repo rate unchanged and maintained a neutral stance. It also revised its FY27 projections, lowering the growth outlook while increasing the inflation estimate.
In view of prevailing elevated global uncertainty, we believe, policy reflects a prudent, calibrated and constructive approach. Going into the policy, external sector and INR challenges were more imperative to address. RBI announced a comprehensive set of forex and capital flow measures aimed at bolstering the balance of payments and mitigating volatility. Initiatives such as expanding the Fully Accessible Route (FAR) for G-secs, restoring export realisation timelines, easing FPI limits, relaxing equity investments for non-resident individuals, incentivizing ECB inflows through concessional forex swaps, and supporting FCNR(B) deposits by covering hedging cost – are geared towards attracting stable foreign capital and should aid in reinforcing external stability. This was also complimented by government removing tax on FPI interest and capital gain on sovereign bonds.
We believe that these measures should address multiple concerns in one go – improve capital flows, stabilise currency, shore up forex reserves, improve system liquidity, moderate credit to deposit ratio for banks, and result in money market and corporate bond yields drifting lower. In view of the above, Indian fixed income outlook appears favourably placed from a medium to long term perspective. “
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