Fixed income portfolio: Using bonds to complete asset allocation | Simply Save

Despite being an election year, the government chose fiscal discipline over populist measures in the interim budget, setting the stage for favourable fixed-income markets.

Lower borrowing programmes, because of lower fiscal deficit, combined with heightened demand in the coming months due to the inclusion of Indian bonds in JP Morgan’s global indices, also bodes well for the fixed-income market in the short term.

Vishal Goenka, Co-founder of IndiaBonds.com shares tips on how to invest in the fixed-income market after the interim budget and the Reserve Bank of India’s monetary policy review.

- Bond markets in India have been steadily growing, which is tied to the growth of the Indian economy.

- The outstanding bond markets in India stand at about $2.5 trillion as of September 2023, having grown at a compounded annual growth rate of 13-14 percent over the last five to six years.

- Taking US Treasuries as a case in point, it can swing by 15-20 basis points in the intra-day trade.

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- Indian bonds haven’t seen that kind of volatility, and have hence given stable and good returns to investors.

- The most important announcement from the Interim Budget was the management of fiscal deficit which is anticipated to be lower in 2023-24.

- The inclusion of Indian bonds in the JP Morgan index is expected to result in $20-30 billion of inflows. Index inclusion gets passive global investment allocators to allocate to a certain country.

- When we see interest rate cuts, we expect consistent price rally in bonds and a lowering of the yields. Hence, the time to invest in fixed income is right now.

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- However, interest rate cuts are not very imminent. Markets in the US keep repricing or pricing rate cuts a little away from immediate action.

- Given the current environment about 30-40 percent of an investor’s financial security investment should be in fixed-income.