February headline inflation surprised markets, for a change, on higher side of expectations. Most segments in food inflation is suggesting a bottoming out. Core inflation remained elevated and increased in the month.

Reserve Bank of India (RBI) cut the repo rate by 25bps from 6.25% to 6.00%, while keeping the stance unchanged. Both inflation and growth forecasts were also revised down.

Credit growth remains strong led by a strong growth in industries and infrastructure segment. Exports remained weak but in positive zone, while imports declined.

Markets are facing political uncertainty given the upcoming general elections and is expected to give a decisive move post elections.

Outlook

While the market seems hopeful of more rate cuts, there is a possibility that further course of monetary policy action is clouded with uncertainties.

Funds which focus on the shorter end of the curve could possibly offer a better risk-reward mix as they provide both attractive carry and also scope of capital gains from a bull steepening of the curve.

Source: Bloomberg, ABSL AMC Internal Research

Portfolio Action

Aditya Birla Sun Life Short Term Opportunities Fund (An open ended short term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 1-3 years):

The fund has a good quality accrual portfolio. Global growth outlook remains benign with International Monetary Fund (IMF) reducing the global growth forecast. Domestic growth and inflation outlook is also benign. These factors remain supportive for bonds.

Aditya Birla Sun Life Credit Risk Fund (formerly known as Aditya Birla Sun Life Corporate Bond Fund) (An open ended debt scheme predominantly investing in AA and below rated corporate bonds):

The fund has a diversified accrual portfolio with adequate liquidity. We have been careful in adding adequate security layers, in the form of collaterals and covenants, while underwriting trades. Long term investors may continue to invest in the fund.

Aditya Birla Sun Life Medium Term Plan (An open ended medium term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 3-4 years):

We have been managing this fund with the dual objective of building a good quality accrual portfolio along with managing the duration actively. We aim to add credit structures to our fund whenever appropriate opportunities appear in the credit markets.

All the data mentioned above is as on 31st March, 2019

Aditya Birla Sun Life AMC Ltd /Aditya Birla Sun Life Mutual Fund is not guaranteeing/offering/communicating any indicative yield/returns on investments

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.