“The Monetary Policy Committee (MPC) met on September 28, 29 and 30, 2022. Based on an assessment of the macroeconomic situation and its outlook, the MPC decided by a majority of five out of six members to increase the repo rate by 50% basis points to 5.9%, with immediate effect. Consequently, the rate of the permanent deposit facility (SDF) is adjusted to 5.65%; and the Marginal Standing Facility (MSF) rate and discount rate at 6.15%. The MPC also decided, by a majority of 5 out of 6 members, to remain focused on withdrawing accommodation to ensure that inflation remains on target going forward, while supporting growth,” he said. said the RBI Governor in his statement.
“While RBI has raised rates by 50 basis points, the stance still remains one of removing accommodation. RBI has acknowledged that policy is still accommodative. Rates are expected to rise further to reach a neutral position. Markets bond markets had already built into the 50 basis points. In the medium term, inflation should keep rates high,” says Sandeep Bagla, CEO of Trust Mutual Fund.
The RBI governor said rate hikes by central banks in developed countries and the Russia-Ukraine conflict present a difficult scenario. And a likely global recession could keep emerging economies like India under pressure for months to come.
“The policy was broadly in line with our expectations. RBI has tackled all major issues including global monetary policy and geopolitical issues. Overall, it looks like the possibility of future rate hikes is open. Our expectation is another 50 basis points in December, then it may become data dependent. Regarding liquidity, RBI seems comfortable with the current situation,” says Pankaj Pathak, Principal Fund Manager, Quantum Mutual Fund.
Mutual fund managers and advisers have told investors to be cautious and stick to their investment plans in accordance with their asset allocation. Many advisors have told their clients that now is not the time to be adventurous. Equity mutual fund investors should remember not to take aggressive bets at this stage and stick to their investment plans. New investors should stick to aggressive hybrid plans, balanced advantage funds, large-cap funds, and flexible-cap funds.
Mutual fund investors should stick to short term plans such as cash funds, money market funds, ultra short duration funds, corporate bond funds, interest rate funds variable, bank and PSU funds, etc. Long-term funds and gold funds are likely to be volatile and can lose money in the as rising interest rates are always negative for these funds.
“From an investor’s point of view, dynamic bond funds remain a very good category, given the global uncertainty. We don’t know how long the RBI will maintain the rate hike cycle. But you need to understand that these funds come with higher volatility and investors need to stay invested longer. Conservative investors should stick to liquid funds, as liquid funds have become more rewarding over the past two months. Stick to them if you don’t want to take any additional risks,” says Pankaj Pathak.
“Yields are likely to rise, which will have a negative impact on long-dated funds. The shorter end already has most of the rate hikes and is unlikely to react much,” says Sandeep Bagla.
“The Monetary Policy Committee (MPC) met on September 28, 29 and 30, 2022. Based on an assessment of the macroeconomic situation and its outlook, the MPC decided by a majority of five out of six members to increase the repo rate by 50% basis points to 5.9%, with immediate effect. Consequently, the rate of the permanent deposit facility (SDF) is adjusted to 5.65%; and the Marginal Standing Facility (MSF) rate and discount rate at 6.15%. The MPC also decided, by a majority of 5 out of 6 members, to remain focused on withdrawing accommodation to ensure that inflation remains on target going forward, while supporting growth,” he said. said the RBI Governor in his statement.
“While RBI has raised rates by 50 basis points, the stance still remains one of removing accommodation. RBI has acknowledged that policy is still accommodative. Rates are expected to rise further to reach a neutral position. Markets bond markets had already built into the 50 basis points. In the medium term, inflation should keep rates high,” says Sandeep Bagla, CEO of Trust Mutual Fund.
The RBI governor said rate hikes by central banks in developed countries and the Russia-Ukraine conflict present a difficult scenario. And a likely global recession could keep emerging economies like India under pressure for months to come.
“The policy was broadly in line with our expectations. RBI has tackled all major issues including global monetary policy and geopolitical issues. Overall, it looks like the possibility of future rate hikes is open. Our expectation is another 50 basis points in December, then it may become data dependent. Regarding liquidity, RBI seems comfortable with the current situation,” says Pankaj Pathak, Principal Fund Manager, Quantum Mutual Fund.
Mutual fund managers and advisers have told investors to be cautious and stick to their investment plans in accordance with their asset allocation. Many advisors have told their clients that now is not the time to be adventurous. Equity mutual fund investors should remember not to take aggressive bets at this stage and stick to their investment plans. New investors should stick to aggressive hybrid plans, balanced advantage funds, large-cap funds, and flexible-cap funds.
Mutual fund investors should stick to short term plans such as cash funds, money market funds, ultra short duration funds, corporate bond funds, interest rate funds variable, bank and PSU funds, etc. Long-term funds and gold funds are likely to be volatile and can lose money in the as rising interest rates are always negative for these funds.
“From an investor’s point of view, dynamic bond funds remain a very good category, given the global uncertainty. We don’t know how long the RBI will maintain the rate hike cycle. But you need to understand that these funds come with higher volatility and investors need to stay invested longer. Conservative investors should stick to liquid funds, as liquid funds have become more rewarding over the past two months. Stick to them if you don’t want to take any additional risks,” says Pankaj Pathak.
“Yields are likely to rise, which will have a negative impact on long-dated funds. The shorter end already has most of the rate hikes and is unlikely to react much,” says Sandeep Bagla.