Park surplus funds in short-term debt mutual funds, FDs

Is India at present the only clean shirt in the world’s dirty economy laundry basket? While the World Bank has cut India’s growth forecast to 6.5% for the year 2022-23 on the back of global uncertain economic outlook, the country’s economic policymakers have predicted that the country is on course for 7% growth rate and is much better placed than other countries around the world. We are one of the fastest growing economy in the world and should dominate world forums in the next decade or so. Despite global economic worries like higher inflation and increasing interest rates and escalating geopolitical tensions, India is holding relatively well and being appreciated by countries around the world.
It’s been more than a decade that the world has been living with a low interest rate period and the hunt for higher yields have made investors take risk and made corporates borrow money at cheaper rates. But now with the US Fed waging a war on inflation and tightening its monetary policy, the era of cheap money has probably come to an end. Comments have been made in the media that the US Fed may “Pivot”, but analysts argue that with inflation running well above the set targets, further rate increases are likely appropriate as policymakers seek to achieve their goals. Emerging markets, including India, have been more resilient having put their economies in order by managing to control inflation better and reducing their dependence on dollar denominated debt. Analysts predict that emerging markets have withstood the year to date economic pain and therefore the GDP growth in the emerging markets will beat the growth of the advanced economies in the years to come. India was batting for over a year to include its widely traded 10 year 6.54% coupon rate GSec (current yield around 7.4%) in the JP Morgan’s Government Bond Index-Emerging Markets Global Diversified Index. Inclusion of the Indian sovereign debt securities would have attracted billions of dollars into the country of precious foreign money and help strengthen the rupee to a large extent. It would have also made the bond markets buoyant and make the world notice India plus help us rely more on bond funds for capital raising than the present policy of depending on bank funds. This inclusion has been pushed further to a future date and bond market participants will keenly watch the important event to happen at the earliest. Investors at the moment can park their surplus funds in short duration debt mutual funds or in fixed deposits of short maturity period as next week Monday could be a down day for the Indian stock market.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.