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Interest Rate May Harden

A.K. Rao, Fund Manager, Canliquid Fund, says investors will be better of choosing liquid funds as they can expect higher yield with hardening of interest rate

A.K. Rao, Fund Manager, Canliquid

Fund Manager since launch on January 15, 2002

Current outlook
Yield on 10-year GOI benchmark is around 6.25 per cent and is likely to move up to 6.50 per cent. One should watch RBI's busy season credit policy, which is likely to be announced on October 26. Most likely, we can expect interest rate hardening by then. US Fed has already increased the rate by 25 basis points recently to 1.75 per cent, which is likely to increase further.

The crude oil price has gone up steeply and at present it is hovering at around $49 per barrel. Inflation, which is presently at 7.86 (WPI), is also a matter of concern. Though the government has initiated several steps to contain and bring down inflation one has to keep a close watch on a host of other factors like credit growth, investment cycle recovery and FII flows.

In such a scenario, liquid funds are the best option as the performance is insulated from interest rate risk. Investors will be better of choosing liquid funds as they can expect higher yield with hardening of interest rate.

Who is your inspiration in the investment world? I keep reading articles by Mark Faber and get inspiration when my fund is ranked top amongst the peer group.

Your favourite book
Autobiography of a Yogi

Your favourite film
I do not watch movie nowadays, other than what I see on TV

What do you do in your free time?
On weekends, I prefer to be with family. I love to go to the club for a swim or play a game of table tennis or billiards with my son.

If you hadn't been a fund manager what would you have been?
A banker