Hyderabad: There is scope for interest rates to come down further. Falling rates augur well for the bond market, said an investment manager.
“The Government has not been increasing its borrowings. Since the borrowings are not increasing, the cost of funds for the Government is not increasing. This leaves scope for reducing rates further. I feel the rates could go down by another 50 bps,” said Saurabh Bhatia, Head of Fixed Income, DSP Investment Manager.
The interest rates in the recent times have gone down by 110 basis points. This is setting the stage for the credit demand to rise across segments. “Low interest rates will cede the next wave of growth,” he said adding that various data indicate that it might take another three to five quarters for the growth momentum to pick up.
The official said fiscal deficit, current account deficit, inflation, global outlook will impact the growth rate.
Pitching for inclusion of a fixed income product in investment portfolio, Bhatia said allocating a portion of portfolio to fixed income investments can potentially help offset losses when equity markets are erratic. While equity investments are related to creating wealth, fixed income channels, as the name suggests is an investing approach focused on preserving capital and generating steady income.