Mr. Malay Shah

In an interview with Capital Market, Malay Shah - Head, Fixed Income, Peerless Mutual Fund said, Markets currently are poised in a challenging zone, with long term yields looking to trend upwards.

Excerpts: 

1. What are your views on fixed income market? How have the yields moved from pre forex crisis till date?

One way up with intermittent short downwards movements has been the journey for the 10 year benchmark yields. From 7.50% in first week of July 2013 to currently 9.00% in first week of April 2014, it has been a outright bear market journey. Markets currently are poised in a challenging zone, with long term yields looking to trend upwards.

Higher government borrowing, election uncertainty, and unpredictable monsoon led inflation movements are making markets nervous. All this is contributing to yields staying in the elevated band. Add to this the set path of US FED tapering and FOMC statement that they might resort to raising rates by 2015, and it becomes clear that there is no rally in sight, atleast in near term. With money markets also no longer enjoying the unlimited liquidity, extreme short term rates are gonna experience bouts volatility on regular basis, depending on how the liquidity in the system is poised.

2. What is your strategy for short term funds?

Short Term Funds, are funds which focus on constant accrual with a investment horizon of 2-3 years. They are best investment vehicles in terms of higher returns that they offer as compared to fixed deposits, and tax efficiency that is built in. The cardinal rules of investing are based on foundations of liquidity, interest rate movement call and credit opinion. Then depending on individual scheme requirements and risk reward appetite of investors in the scheme specific strategies are developed. Basis this, for short term fund, it's an endeavour on my part to invest in good quality assets and mispriced/misunderstood credits to generate extra returns for the investors without taking undue risks.

3. FIIs have shown good interest in the market? Will this continue as we near elections?

Yes, currently it looks to continue. Currently the flow is governed by stable global scenario, based on which there are strong inflows. As India still retains strong competitive advantage vis a vis other emerging markets and coupled that with bright chances of stable government in upcoming elections, inflows are coming at a faster pace. Albeit there might be some short term volatility depending on the perceptions of evolving scenario.

4. What reforms you expect for curtailing fiscal deficit?

In the current fiscal, centre has managed to bring down the deficit to the planned levels. The deficit for current fiscal would be more of a function of inflation trajectory during the year. The softening input and commodity prices should further aid in lowering the inflation, thereby leading to stronger currency. A broad economic revival should help in achieving the revenue estimates thereby lowering the twin deficit.

5. What are your Union Budget 2014-15 expectations?

Depending on what sort of government is formed at the centre, things will eventually take shape. At present juncture, it would be a futile exercise to indulge in such though processes.

6. What's your investment strategy?

The guiding principle on investments is objective of generating optimum risk adjusted return for the fund investors. A broad strategy revolves around interest rate outlook, liquidity position and credit calls. Further to this depending on the individual scheme stated objectives, investor's risk reward appetite and investment horizon of individual schemes, strategies are designed.

7. What is your advice to the investors as we enter the new financial year?

The investor should have clear cut investment objectives, basis this investment can be done in more systematic and fruitful manner. It helps if they set realistic returns expectations based on their risk appetite and investment horizons.

From debt investment perspective, ultra short term and short term funds are the current favours considering the higher risk adjusted returns they provide.

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