ETMarkets Smart Talk: US Fed could take a pause in Sept but RBI may consider a rate cut cycle in April–June 2024: Devang Shah

economictimes.indiatimes.com:

“We believe that the Fed might take a pause in the September meeting and continue to remain data dependent,” says Devang Shah, Co-Head Fixed Income, Axis Mutual Fund.

In an interview with ETMarkets, Shah, said: “Expectations of a slowdown have now been pushed towards the next year given the strong macroeconomic picture and markets now expect interest rates to remain elevated. The RBI may consider a rate cut cycle in April – June 2024” Edited excerpts:

The market seems to be finding some resistance at higher levels – What is your take on markets at current?
Considering the growth inflation dynamics, we believe that we have already seen the peak of the growth cycle and the near-term peak on inflation. A large part of the first half of government borrowing is behind us.

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Keeping all these macro parameters in mind, the US Fed rate hikes broadly done and demand-supply dynamics favourable for bonds, we believe that markets will continue to trade in a range.

Given that Indian bonds are largely domestic owned, one shouldn’t expect any major sell-off in response to the US rise in yields nor should one expect a dramatic depreciation in the rupee.

We expect limited upside risk to yield for now but will be watchful of the price pressures and oil prices. Domestic factors than external could play a pivotal role in determining the direction of bond yields.

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