Debt mutual funds: Axis MF suggests where to invest as RBI may raise rates by 50-75 bps over next 6 months — SkimNews
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- Axis Mutual Fund expects the RBI to undertake a "measured tightening cycle of 50-75 bps over the next 6 months," taking the operative policy rate toward 6%-6.25%.
- Axis MF is overweight on 1-3 year corporate bonds citing "favourable carry, ample liquidity and limited CD issuance," while remaining cautious on long-duration state development loans (SDLs).
- The 10-year government bond yield moved above 7% immediately after the US Federal Reserve raised the federal funds rate by 25 basis points to 3.75%-4.00% at its September 2026 FOMC meeting.
- Axis MF remains neutral on government securities but recommends "tactically add duration" as yields reprice higher, suggesting staggered exposure to gilt funds through the hiking cycle.
- Axis MF flagged risks from elevated state borrowing, the 8th Pay Commission, softer tax collections, subsidy pressures, deferred Bloomberg index inclusion, and potential RBI OMO sales to absorb surplus liquidity.
- Axis MF noted that more persistent upward pressure on Indian yields is likely to come from domestic factors rather than simply from higher US Treasury yields, despite the Fed's signal of a "higher for longer" environment.
Why it matters: Axis MF's call for 50-75 bps of RBI tightening translates directly into near-term pain for existing long-duration debt fund holders as bond prices fall, while creating an entry point for investors to lock in 7%+ yields on 10-year government bonds or attractive carry in 1-3 year corporate bonds before further repricing.
Ask SkimNews
