Fund managers react to policy, rate cuts

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Mumbai: The Reserve Bank of India lowered its key short-term rates by 25 basis points each and forecast economic growth of 6 per cent for the year that began on April 1.

Highlights of RBI's monetary policy

The bank cut its reverse repo rate to 3.25 per cent and the repo rate to 4.75 per cent, effective immediately. It also lowered its estimate for economic growth for the previous fiscal year that ended March 31 to 6.5 per cent from its previous estimate of 6.7 per cent.

Following are comments from fund managers to the rate cut and policy comments:

Ashish Nigam, Head-Fixed Income, Religare Asset Management:

"It was an unexpected cut. More worrying is the underlying tone. They have revised the growth target, they have again reiterated the fact that credit offtake is not happening. I think that is slightly worrying.

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But otherwise I think the sentiment is improved a bit. Yield curve would steepen further. Short-end would ease by another 25-50 basis points. Long-end would remain volatile but would depend on supply and demand."

Mahhendra Jajoo, Head-Fixed Income, Tata Asset Management:

"The policy is in line with the current environment - people were expecting a token cut.

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"I think that markets are now looking stable and it's positive for the bond market. I think 10-year (bond yield) can come close to 6 per cent now."

Shobit Gupta, Portfolio Manager-Fixed Income, ING Investments:

"Rate cuts by the RBI emphasises continuation of softer monetary stance by RBI and will further help in the much-needed transmission of lower interest rates.

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"We would expect fixed income market to remain positive and looking at 10-year touching 6.10 per cent levels in near term."

Murthy Nagarajan, Head-Fixed Income, Mirae Asset:

"I expect a rally in bond market. Expect further rate cut in the coming months due to low GDP growth estimate of 6 per cent levels."

Parijat Agrawal, Head-Fixed Income, SBI Funds Management:

"This quarter-basis-points (cuts), even it was not there, should not have made any difference.

"The rate cuts are in the right direction but will not have much of an effect.

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"The GDP figure, we feel, will be lower than 6 per cent.

"Though we have low rates, the economy will take some time to pick-up."

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