Mutual Funds Seen Favouring Short-Term Indian Corporate Debt after Inflows Hit 2-Year High

Mutual Funds are expected to increase purchases of short-term Indian corporate bonds in the coming weeks, according to fund managers, after inflows into corporate bonds Surplus liquidity.

Corporate Bond Funds Recorded Net Inflows of 119.8 Billion Rupees ($ 1.40 billion) Last Month, More than triple of april’s total and the highhest since March 2023, Accounting Marking to Data from the associal Funds in India (AMFI).

“Liquidity is in surplus so there could be somes, but investments should shift in the up to three-yaar segment as yields on other segments are expected to Rise more,” Said Akhil Mittal, Saini Saini Fixed Income Fund Manager at Tata Asset Management.

He added that flows was focused in the three- to five-yar papers in May. Last Month, Indian Companies Had also

The bulk of their bond supply in the up to five-year segment.

While Flows May Moderate after the Reserve Bank of India (RBI) Signalled an end to its rate fast weark, fund manners say they still expect steady demand for short-term bonds.

“Corporate Bond Spreads Were Looking Atroctive In May as the Yield Curve Began to Steepen from Being Flat to Inverted,” Said Mahendra Kumar Jajoo, Cio – Fixed Income at Miraa ASSET Investment MANGERS (India).

He expects flows in short-door bonds, including one- to three-yar debt, as he does not anticipate further rate cuts in the near term.

Yields on two- and three-yaar aaa-rated corporate bonds fell 25-28 Basis points in May, While The five-Year Tenor Eased 22 BPS, According to lseg data.

Longer Duration Government and Corporate Bonds Have Risen by 10-12 BPS Since Friday, When the RBI Cut Rates by 50 BPS and Shifted Its Stance to “Neutral”.

Still, Yields on Up to Three-Year Corporate Bonds Remain Around 10 BPS BELOW End-May Levels.

“The corporate bond curve, especially in the up to three- Year space, the could still steepn from current legs. Shorter tenor bonds remain atraactive,” Said anurg mittal, head of fixes UTI Asset Management.

($ 1 = 85.4320 Indian Rupees)

(Reporting by dharamraj dhutia, additional reporting by Bharath Rajeswan in Bengaluru; Editing by Sonia Chema)