Turning the tide – April 2023

Key Highlights

Aligning with policy pause: inflation print supports RBI’s stance at 6.5%. It has raised the threshold for future rate hikes in FY24.

Core inflation dips: Mar’23 brings relief after pandemic persistence

Key takeaways

Takeaways

• Both inflation and core inflation have fallen, attributed in part to the high base effect from last year.
• RBI (Reserve Bank of India) may likely continue with its policy pause after the recent decline in inflation.

• The potential risks to the current outlook include:
  • Geopolitical tensions
  • Global financial market volatility
  • Rise in oil prices

Views

• Fixed Income
  • Three to Five Years looking attractive from a duration standpoint. Conservative allocation towards longer end.
  • Stick to Sov/AAA-rated papers. Minimal and cautious allocation to AA-rated instruments
  • Accrual (Active + Passive) + Duration (Active) as strategy
• Equity
  • Large-cap portfolio orientation; build midcap exposure selectively. Smallcap exposure if required by target portfolio.
  • Sectoral Winners: Auto & Ancillaries, Banks, Capital Goods, Industrials, IT, FMCG

Continue allocation to gold in line with target asset allocation.

Fixed Income Play