The fixed-income market is an ever-evolving and dynamic sector. The overlap between geopolitics, macro-economy and digital transformation are factors impacting this sector. Investment strategies are getting influenced by global growth and inflation rates while sustainable finance initiatives and regulatory shifts are gaining significance. In a conversation with Outlook Money LIC Mutual Fund’s Chief Investment Officer – Fixed Income, Marzban Irani, shed light on factors affecting the growth path of the fixed-income sector. Irani shared his thoughts on the complexities and possibilities in the fixed-income investment sector and also anticipated trends and challenges for the fiscal year 2025.
What are the anticipated emerging trends in the fixed-income market for FY25, and how might these trends impact investment strategies?
From the starting of this year, growth numbers have been strong, and inflation has been higher than the target levels of Central bankers all over the world. Although market participants are anxiously waiting for rate cuts, the volatile macro data might prolong higher rates for long.
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How do you foresee geopolitical events impacting fixed-income markets in the upcoming fiscal year, and how can investors position themselves accordingly?
Geopolitical risks were there and might continue to be present. Investors should focus on medium term outlook and focus on asset allocation.
What insights can be gleaned from the current bond market outlook, and what potential opportunities do these insights present for fixed-income investors?
Bond market outlook is positive and favorable. Lower supply compared to expectations in the domestic market and strong demand from pension funds, banks and insurance companies will help the borrowing program to sail through. Inclusion in JP Morgan bond index and Bloomberg is expected to add to further demand. We might see shallow rate easing going ahead. Dividend from RBI and PSU banks will further strengthen government coffers. GST numbers have been strong.
Hence Fixed Income provides an opportunity to investors.
In what ways is digital transformation reshaping operations within the fixed-income market, and what benefits does this transformation offer?
The market is already trading online in Gsec on NDS OM (Negotiated Dealing System - Order Matching system). SEBI has made a small portion mandatory to trade on RFQ platform for corporate bonds. There are many platforms which are encouraging retail investors to trade. This is the digital transformation happening.
What regulatory changes and compliance requirements are currently influencing the fixed-income landscape, and how are investors navigating these challenges?
Recently SEBI has brought down the face value of bonds from one lakh to ten thousand. This will help higher participation in medium term. Also, investors can diversify across different issuers. Similar changes in REITs. Retail investors can participate in real estate through REITs. Having said this is a beginning and liquidity will improve over a period of time.
What are some of the key challenges and opportunities that investors face in global fixed-income markets, and how can they effectively address them?
On challenges there is volatile data on inflation, geopolitical risk and global commodity prices. However, in medium term this will get evened out and we might see rate cuts from central banks where inflation is near target levels. Also, since US has hiked aggressively when they cut rates the rate cuts will be deeper.
In what ways can investors capitalize on opportunities presented by the rise of green bonds and sustainable finance initiatives within the fixed-income market?
Green bonds provide an opportunity to local and domestic investors for diversification. Also in some industry, this investment is a part of infrastructure investment. This helps in taking infra exposure.
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