Chaitanya Pande, Head – Fixed Income, ICICI Prudential AMC joined the company in September 2002. He holds a Masters in Business Administration from IMI Delhi. Prior to joining ICICI Prudential AMC he was with Jardine Fleming AMC Pvt Ltd. Chaitanya has an overall work experience of around 15 years. His core competency lies in credit analysis and efficient portfolio management. His efficiency in fund management also won him the coveted Business Standard Fund Manager of the Year( Debt) - 2011.Chaitanya currently manages fourteen funds .
ICICI Prudential Asset Management Company Ltd. is a joint venture between ICICI Bank, India’s second largest commercial bank & a well-known and trusted name in the financial services in India, & Prudential Plc, one of the UK’s largest players in the financial services sectors. In a span of over 18 years since inception and just over 13 years of the joint venture, the company has forged a position of preeminence as one of the largest Asset Management Company’s in the country, contributing significantly towards the growth of the Indian mutual fund industry. The company manages significant Mutual Fund Assets under Management (AUM), in addition to our Portfolio Management Services (PMS) and International Advisory Mandates for clients across international markets in asset classes like Debt, Equity and Real Estate. The company service investor base with own branch network of around 168 branches and a distribution reach of over 42,000 channel partners.
Replying to Yash Ved of IIFL, Chaitanya Pande says “RBI policy over the next two quarters will be key to market direction. There is a significant need for hikes in administered oil prices for market stability and fiscal prudence.”
What was your view of the budget?
In terms of fixed income market, the budget is seen as not doing enough on the fiscal consolidation side. While direction is appropriate there is no indication of reduction on expenditure front. In our view, Budget is unlikely to be noninflationary. RBI policy over the next two quarters will be key to market direction. There is a significant need for hikes in administered oil prices for market stability and fiscal prudence. The gross market borrowing of Rs. 5.7 tn is slightly higher than market expectations and subsidies appear to be understated. RBI rate cuts will be linked to fiscal consolidation and global events.
How has the liquidity scenario been?
Given the recent CRR cut, market is reasonably steady on liquidity with borrowing numbers just about 1600BN well within our expected band. We therefore expect liquidity in QI to be relatively easier since there are a lot of maturities coming up and also RBI is expected to begin its rate cut cycle. The second quarter will show some strain since RBI is unlikely to do any OMOs in the first two quarters of the next fiscal.
What is your take on the rupee?
In the short run, Rupee is likely to be driven by international flow and increasing investment flows into India will help support the rupee. However, given a high current account deficit the bias is towards weakening. Sustained policy actions from the government can lead to a significant change in this position and has the potential to result into a positive swing in the rupee.
When do you expect RBI to begin cutting rates?
RBI in line with expectations maintained a status quo on rates given that it had already just cut CRR pre policy by 75 bps to address the increase liquidity strain in the market, expected to further widen due to the advance tax collection. It was therefore an imperative action towards liquidity management. The resultant liquidity infusion has led to markets being more stable with the CD rates being less volatile and stabilizing at around 11-11.15 %.
From the funds perspective also the impact has been more liquidity related as it has reduced the portfolio volatility by averting any extensive liquidity pressures on the banking system. We believe that RBI will initiate rate cut rates in April policy which is on 17th of April by around 25bps, albeit government is able to pass through oil price hikes. However further action will depend on the global commodity prices and governments ability to drive fiscal consolidation.
What is your view on inflation?
Inflation which we think sort of reached the 6.5 to 7% nearly would probably stabilize at these levels for the next 3 to 6 months and we think of course industry force will depends upon how international commodity prices play out.
What is your outlook on the 10-year benchmark yields?
The 10-year benchmark yields are expected to remain range bound and the market is likely to take further cues from fiscal management and government action on pass through of oil prices.
What is your advice to the retail investors?
We expect one to three year space to continue and outperform by giving a good combination of lower volatility and better carry. We therefore still think that ICICI Prudential Short Term Plan and the ICICI Prudential Regular Savings Fund is best suited for people who are looking for a reasonable return with moderate risk the mid-maturity bucket. For investors with a lesser investment horizon, we recommend investments in Ultra Short Term Plan. Investors who are currently invested in our duration products need to hold on to their investments for the time being.