Puneet believes bulk of the bonds bull market is now behind us and its now time to focus more on accruals.
The current technical pull back in yields to 6.45-6.50% levels on the 10 yr GSec can potentially extend to 6.60%, which can present a small tactical window as he expects the 10 yr yield to be range bound in the 6.25% to 6.60% range for the coming couple of quarters at least.
He does not believe RBI will cut rates anytime soon, given its inflation forecast of 4.9% for 4QFY26.
Back in May 24 when he spoke on this platform before the rate cut cycle commenced, he advocated 70% allocation to dynamic bond funds and 30% to corporate bond funds in anticipation of the rate cut cycle.
He also suggested that once the cycle is done, it would be time to flip this allocation from 70:30 to 30:70 as the focus would shift from capital gains to accruals.
Now is a good time to do that flip in a calibrated manner he feels. If you see the 10 yr yield drop to 6.30% levels, do the switch. Ify ou don’t want to try and time it, make the shift in a phased manner over the next couple of months.
He has moderated duration in PGIM’s dynamic bond fund to 5 yrs and in their corporate bond fund to around 3 yrs.
Across funds that have a mandate to own corporate bonds, he is stepping up allocation to corporate bonds over G-Secs in the quest for higher accruals. However these will be only AA and above bonds.