Rupee at record low: How to position your debt portfolio?

Continuing its one way slide, the rupee today made a fresh low, breaching 58.98 per dollar intra day Tuesday as more foreign institutional investors (FIIs) sold their debt holdings after US yields spiked further yesterday post the S&P upgrade. The Indian currency is currently at 58.44 per dollar. 

Importantly no exporters were seen offering dollars in India. Other Asian currencies like the Indonesian rupiah, the Thai baht, Phillipino peso and Malaysian ringitt have also fallen around half a percent today.

So, how to position your fixed income portfolio in such a scenario?

Shiv Kukreja (Certified Financial Planner ), Founder & Managing Partner, Ojas Capital suggests that fixed income investors should invest in the liquid funds from a very short-term perspective and switch to Gilt funds or Income funds once the yield crosses 7.40-7.50%, from one to two years perspective.

He says that FIIs have been selling in the Indian bond markets and taking money back to invest in the US and Japanese bond markets. Yield on the 10-year 7.16% benchmark G-Sec has risen from 7.12% to 7.32% in the last week or so. However, he thinks it is a short term trend.

"With fiscal deficit and current account deficit (CAD) coming under control in the next few months, the yield should fall below 7% from the medium term perspective," Kukreja explains.