Growth to Remain Sluggish | Value Research Interest rates are expected to come down gradually, says Akhil Mittal, Fund Manager, Tata Dynamic Bond Fund

Growth to Remain Sluggish

Interest rates are expected to come down gradually, says Akhil Mittal, Fund Manager, Tata Dynamic Bond Fund

Akhil Mittal, Fund Manager, Tata Dynamic Bond Fund tells us that the consumer price inflation will continue its downward trajectory in the medium term.

Growth to Remain Sluggish Akhil Mittal, Fund Manager, Tata Dynamic Bond Fund

What is your outlook on interest rates in India?
In medium term, we expect Consumer Price inflation to continue with its downward trajectory and hence create space in Monetary Policy for easing. Growth is also expected to remain sluggish for some time and hence we expect RBI to deliver 50 bps rate cut in FY 16. Hence interest rates are expected to come down gradually. In the interim, we might see some volatility on account of global factors like crude oil prices, capital flows, government bond yields across west and currency volatility. We might see pressure on yields in near term and expect interest rates to go up for a short period before starting a downward trajectory.

What is your framework of taking a duration call?
Framework for duration call is both Macro and Micro. Within macro, we analyse various factors like inflation, deficits, currency movements, policy moves, global yield movements etc. Within micro, we analyse various factors like demand-supply, liquidity, momentum, etc. Post this analysis, we draw the risk return endeavour and derive at amount of risk in terms of duration that suits best.

What is your framework of taking a credit call? What kind of credit risk you don't take at all?
Framework for credit call is Bottom up and top down. Bottom up in terms of company financial analysis, fundamental analysis (market positioning, competitive positioning, SWOT, etc.), management quality and levels of corporate governance. Top down in terms of industry trend and performance, trajectory of economic momentum and likely impact on industry, regulatory risks, etc. There are other company specific factors which are considered while shortlisting of credit for investible universe.

Any rule which you rigorously follow in managing your fixed income fund today?
We have adhered to the principle of SLR (Safety, Liquidity and Returns) strictly for a long period of time. This ensures that risks in the portfolios are commensurate to the objectives and helps maintain consistency in decision making.

In your view, how should a long-term fixed income investor optimise his returns?
A long term fixed income investor should always keep return target in mind. Interest rates generally have a cyclical movement. In long duration strategies, investor could be well-off if he can invest and divest based on meeting of return targets rather than chase duration. In low duration / accrual strategies (good credit quality schemes), an investor should look at these as all season, and keep investing periodically. By following the above 2 styles, one can capture both movement in interest rates and at same time ensure regular income accrual.

What will you attribute the above average performance to?
Rigorously followed investment principles, and robust investment process have attributed to consistent, long term above average performance.

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