Mr. Prashant Pimple
Senior Fund Manager – Fixed Income Investments, Nippon India MF
Mr. Prashant R. Pimple has a total experience of 14 years in debt fund management. He has a total experience of nearly a decade in managing fixed income portfolios with Nippon Life India Asset Management Limited (Formerly Reliance Nippon Life Asset Management Limited) . Prior to this, he worked as portfolio manager with Fidelity International Limited Asset Management Company and as Portfolio Manager in Investment Advisory Services (Debt Institutional) in ICICI Bank Ltd. From 2000 to 2003, he was a fixed income trader with Bank of Bahrain and Kuwait, B.S.C. and The Saraswat Co-operative Bank Ltd. He also had a stint with SIDBI in the Project Finance Division.
1. The government is likely to miss the fiscal deficit target for 3.3% this year. What impact do you see of this on the debt markets?
Answer: In the current market scenario of Surplus Liquidity, Accommodative Monetary Policy Stance & fear of Fiscal Slippage, we expect bond yields to trade in a broad Range. The current Term Premia (5yr GSecs – Repo Rate) is ~140 bps & Term Premia (10yr GSecs – Repo Rate) is ~150bps, which is currently pricing in a lot of risks.
2. In recent years we have seen a series of rate cuts from RBI but yet the yield curves have remained steep. Why is this happening and how is the government responding to this situation?
Answer: Rate Cuts and Surplus Liquidity has helped shorter end yields and we have seen transmission happening through shorter end of the yields curve. Longer end yields are a function of Fiscal Deficit as well as Duration risk appetite of the market. Further Crowding out of the borrowing in SDLs & Corporate Bonds have had overall impact in longer maturity GSecs yields. Hence the overall Steepening of the yield curve.
3. The RBI recently resorted to unprecedented bond auctions. How has this impacted the bond markets?
Answer: Special Open Market Operation by RBI is a special Operation, where the RBI Buys longer dated GSecs from the market and Sell shorter dated GSecs to the market. This usually leads to Bull Flattening of the GSec yield curve. But in the current market scenario of Surplus Liquidity, RBIs Operation Twist has helped to bring the entire yield curve lower and help transmission of rates.
4. What is your opinion on the interest rate movement going forward?
Answer: While we expect bond yields to trade in a range due to additional borrowing fear on one hand while RBIs Special Operation on the other hand, we prefer the shorter maturity G-Secs and AAA PSUs / Privates, while remaining cautious on longer maturity corporate bonds and G-Secs.
We also expect new 10yr GSecs bond yield to remain range bound (6.25% – 6.75%) from near term (3 – 6 months) perspective as market starts pricing in a pause in interest rate in current Fiscal & Durable Liquidity Support in form of OMOs / FX Swap only to take care of any major demand – supply mismatches.
5. How are you navigating the current markets? What has been your broad strategy to manage the flag ship portfolios?
Answer: We will focus on Short duration + Spread play in terms of Core portfolio construct. We would run 3 - 5 yr Gsec & 2 - 3 yr AAA corporate bond segment as our Core portfolio, while longer duration would be tactically added to the portfolio only through G-Secs. We remain cautious on longer maturity corporate bonds and G-Secs.
6. What would you advice to investors looking towards debt investments? Where should they ideally invest for a medium to long term investment horizon?
Answer: Medium Term Investment Horizon: We recommend high grade short term bond funds for short to medium term investment horizon.
Long Term Investment Horizon: We recommend Gilt Fund, Nivesh Lskshya Fund & diversified Credit Funds from a long-term perspective.