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NOVEMBER 2014

FIXED INCOME MARKET ENCOURAGING SIGNS AHEAD

The Indian bond market has been experiencing a bull run since early
September due to several reasons like:
Sustained fall in prices of consumer goods
Sharp fall in crude oil and key commodity prices
Emergence of deationary headwinds in Europe, Japan and China
The prices of consumer goods and services have been gradually
declining of late and are expected to remain soft. The recent decline in
local petrol and diesel prices is not only likely to have a positive impact
on ination, but may also reduce Indias crude import bill. This,in turn,
could help narrow the Current Account Decit and Fiscal Decit for
FY2015.

Marzban Irani
Vice President,
Fixed Income
DSP BlackRock Mutual Fund

Global bond yields have also been trending lower lately amid
expectations of further monetary stimulus by the European Central
Bank (ECB), Bank of Japan (BOJ) and the Peoples Bank of China
(PBOC), even though the Federal Open Market Committee (FOMC) has
recently concluded its bond purchase program. This has led to a
signicant improvement in the outlook for emerging market bonds.
Market participants in emerging markets are focusing on a gamut of
factors. These include a signicant improvement in Indias
macro-economic landscape in the last three months, stable to
declining consumer prices, a sharp fall in bank credit growth,
relatively stable currency and the prospect of rate cuts by the Reserve
Bank of India (RBI) in 2015.
Foreign Investors have maintained a favorable view on Indian bonds.
They have invested around $23 billion in Indian xed income assets
since the beginning of the year, due to relatively attractive bond yields
and a stable currency.
Market Outlook
We expect Indian bond yields to decline further in a gradual manner
amid the improving macro-economic landscape. The recent decline in
consumer prices and developments in global markets may provide the
RBI with headroom to reduce the Repo Rate. We expect the RBI to
announce its rst rate cut around March-April 2015. We also expect
the benchmark 10Y government bond yield to touch 8% by April 2015.

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A further decline in the benchmark 10Y government bond yield will depend on expectations of an additional
reduction in Repo Rate by the RBI. Current inversion in the OIS curve implies that market participants expect
a 75 basis-point reduction in the Repo Rate over the next two years.
Where do opportunities lie in the fixed income market?
We rmly believe that Indias rate cycle has peaked out. Now is the time for investors to consider investing in
longer duration xed income funds, as bond yields are likely to decline going forward. We recommend that
investors consider xed income funds with higher average maturity and higher duration, depending upon
their risk appetite and investment horizon.
Investors with an investment horizon of more than a year may consider the DSP BlackRock Short Term Fund.
Investors with an investment horizon of more than three years and who wish to invest in higher average
maturity funds may consider investing in the DSP BlackRock Income Opportunities Fund.
For investors who wish to have exposure to both corporate bonds and government bonds, we suggest the DSP
BlackRock Bond Fund. This is suitable for investors who seek a long-term asset allocation to xed income as
well as for those with an investment horizon of more than three years.

DSP BlackRock Income Opportunities Fund (DSPBRIOF)


This Open-ended Income Scheme is suitable for investors who are seeking^
Income over a medium-term investment horizon
Investment in money market and debt securities
Low Risk (Blue)

DSP BlackRock Bond Fund (DSPBRBF)


This Open-ended Income Scheme is suitable for investors who are seeking^
Income over a long-term investment horizon
Investment in money market and debt securities
Low Risk (Blue)

DSP BlackRock Short Term Fund (DSPBRSTF)


This Open-ended Income Scheme is suitable for investors who are seeking^
Income over a medium-term investment horizon
Investment in money market and debt securities
Low Risk (Blue)

^Investors should consult their financial advisors if in doubt about whether the
scheme is suitable for them.
Note: Risk may be represented as:
Investors understand that their principal will be at Low risk (Blue)
Investors understand that their principal will be at Medium risk (Yellow)
Investors understand that their principal will be at High risk (Brown)

Note: Effective November 29, 2014, there will be a change in the fundamental attribute of the DSPBRBF whereby the weighted average
maturity of the DSPBRBF will remain between one year and twenty years. For more details please refer the notice dated October 22, 2014
available at www.dspblackrock.com
In this material DSP BlackRock Investment Managers Pvt. Ltd. (the AMC) has used information that is publicly available, including information
developed in-house. Information gathered and used in this material is believed to be from reliable sources. The AMC however does not warrant
the accuracy, reasonableness and / or completeness of any information. We have included statements / opinions / recommendations in this
document, which contain words, or phrases such as will, expect, should, believe and similar expressions or variations of such
expressions that are forward looking statements. Actual results may differ materially from those suggested by the forward looking
statements due to risk or uncertainties associated with our expectations with respect to, but not limited to, exposure to market risks, general
economic and political conditions in India and other countries globally, which have an impact on our services and / or investments, the
monetary and interest policies of India, ination, deation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or
other rates or prices etc.
For investment objective, asset allocation, scheme specic risk factors and more details, please read the Scheme Information Document,
Statement of Additional Information and Key Information Memorandum of Scheme available on www.dspblackrock.com.

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

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