Ms. Lakshmi Iyer
Chief Investment Officer ( Debt ) & Head Products
Kotak MF
Ms.Lakshmi Iyer has been with the Asset Management Company since 1st April 2000. From 2000-2006 Lakshmi was performing the role of a fund manager where she was responsible for credit research as well as deal execution, managing fund performance across all debt funds, and assisting sales in client interaction where required. From September 2006 till September 2008, she was Heading Products where her primary responsibilities were product-related initiatives, product pricing and coordinating with the funds management and sales team in the role of a portfolio specialist. From September 2008 till date she is heading the Fixed Income and Products team. In her earlier stint, from November 1997-October 1999 in Credence Analytics Pvt Ltd. she has also worked as a Research Analyst where she was tracking corporate bond markets in India and generating research reports. She was also instrumental in conceiving various financial software tools for Indian markets through effective liasoning with software and technical team at Credence.
Q.: What are your views on the current fixed income markets?
India has embarked upon a shallow rate hike journey
Answer: the current bond markets seem to be at the extreme end of pessimism which is reflecting in the elevated nature of the yield curve. We have already seen one rate hike in June 2018. While the markets are reflecting couple of more rate hikes, we are of the view that India has embarked upon a shallow rate hike journey and incremental rate actions would necessarily be data dependent
Q.: How have the yields moved and which direction you see them moving in near to mid-term? What will the key driving factors for yields?
Answer: yields have continued to move northward across tenures and across various fixed income segments. Going forward, inflation data is very critical for next course of rate action. Additionally, global markets have also become vulnerable to potential trade war kind of events. While there could be intermittent respite in rates in near to medium, expect rates to remain at elevated levels
Key factors would be domestic and global macro, and domestic liquidity especially for the shorter end of the yield curve.
Q.: What are your views on the inflation figures? How do you see them moving forward?
While there could be intermittent respite in rates in near to medium, expect rates to remain at elevated levels
Answer: for next few months, inflation data may not look very worrisome largely due to base effect. Key to inflation data is the direction and pace of move in crude oil prices. In so far, crude oil prices have remained sticky. Evert $10 /barrel rise in crude oil prices could potentially impact CPI by 30-40 bps. As of now we do not see any material risk to the RBIs inflation target for march 2019.
Q.: What is your strategy for short term funds? What is your exposure to long term funds and why?
Answer: the strategy for our short term funds has been to be overweight good quality corporate bonds and maintain duration at 1.5-2years. The strategy also has been to run low allocation to government securities to reduce volatility on overall portfolio.
Q.: Have you made any changes in your funds after the recent rate hike? What were the reasons for same?
Answer: we have for long been maintaining low durations across fixed income strategies. The key reason for the same has been the high uncertain environment and more so the market reaction to various events in the past. With a growth economy like India, rates may not look to materially ease from the current levels. Hence the defensive bais across our portfolios. The focus for us has been to manage the risk first and then generate returns.
Q.: What is the ideal investment approach for investors looking to invest for medium to long term in debt market?
Answer: interest rate volatility is a given in the fixed income markets among other risks like credit risk and liquidity risk. It is therefore imperative for an investor to bear in mind the investment tenure before undertaking any investment decision. In the current scenario where yield curve has been fairly elevated, credit risk funds which typically run lower durations could a possible investment solution. For those seeking to mitigate interest rate risk to the extent possible, Fixed maturity plans (FMPs) could be a potent option. Key to have a discipline while making such investments and not get perturbed by interim market volatilities.
