'Interest rates are likely to harden'
FUND MONITOR: S Naganath
| We aim to build a quality debt portfolio with low downside risk in terms of interest rate sensitivity. We try to minimise active risk across the portfolio. |
| We endeavour to ensure a high-quality debt component with a conservative risk profile, since the active risk is mostly assumed in the equity component. |
| What is your outlook for the debt market and the interest rate scenario? |
| We believe that interest rates may harden marginally by about 25 basis points in the near-term. However, they are likely to remain stable thereafter for the rest of the year. |
| So, how are you positioning your portfolio? |
| The debt component is largely anchored in short-dated and floating-rate debt securities. Therefore, in the context of hardening interest rates, we expect to minimise the downside risk of the portfolio. |
| What is your average portfolio duration? Are you contemplating any changes in the near-term? |
| The duration of the debt component as on April 29, 2005, was 98 days. We expect to maintain the duration at the current levels in the near term. |
| What will be the fund's exposure to equity this year? What kind of stocks are you looking at? |
| We modulate the equity exposure - depending on our short- to medium-term outlook for the equity market - to minimise downside risk and optimise returns. We pick stocks of companies that fall within the top 100 companies by market capitalisation. |
| Therefore, the focus is on large-cap stocks, which display good fundamentals and enjoy high liquidity. |