'Interest rates may move northward'

FUND MONITOR: Rahul Pal, Assistant fund manager, Sundaram Mutual Fund

We focus on investing in good credit quality papers and ensuring that the investments are in liquid papers.

We also look at the investor profile to minimise the impact cost in case of unexpected flows from the fund. We exit at levels which we consider a fair value of the security.

The fund portfolio is dominated by higher quality papers. Don't you think this will drag down returns?

The strategy is in consonance with the investment objective of the fund which seeks to provide a level of income consistent with the preservation of the capital.

Papers with the highest safety ratings mitigate credit risk in the portfolio.

What is the fund's average maturity likely to be going forward?

The fund would remain conservative in its average maturity profile. Going forward, the fund's maturity would remain between 90 and 120 days, depending on market conditions.

What is your outlook on the debt markets in general?

Interest rates are likely to remain stable and would depend on the pass-through effect of fuel prices in the domestic inflation.

With high oil prices stoking inflation fears and good industrial growth numbers, a possible northward bias to interest rates remain.