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| Do you think that money will move away from bond markets as the equity market is booming? |
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| Historically, there has been no evidence of shifts between various asset classes. People who invest in bond markets are found to be reluctant investors in equity markets. |
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| The bond markets offers stable, albeit low, returns over time. The equity markets, on the other hand, move in spurts. |
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| People who invest in bond markets would prefer stable returns rather than high returns from the equity markets that may come in spurts. |
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| Also, there is the risk of erosion of capital in the equity market, which is much lower in the case of debt markets. |
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| Therefore, unless investor preferences shift, the change of money from the bond to the equity market should not happen. |
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| You have a high proportion of your portfolio in government securities (G-Secs) and AAA papers. Are you not sacrificing returns by staying away from lower-rated papers? |
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| The portfolio is dependant entirely on the risk-return profile. We have invested 98 per cent of our portfolio in G-Secs and AAA papers because we believe that the spreads are too low. |
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| At present, the spread between AAA and AA papers is not more than 45 basis points. This implies that even if the proportion of AA papers was to be increased to 20 per cent, the yield on the whole portfolio would translate into a 7-8 per cent increase. |
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| This marginal increase in spread does not justify the risk taken in increasing exposure to AA papers. |
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| We will increase exposure to AA papers as and when the spread increases enough to justify the additional risk. This would depend on market conditions and the relative movement in spreads between different papers. |
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| What is your view on interest rates? |
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| We believe that there should be a stable-to-soft bias in interest rates. If you look at the inflation rate, you would observe that leaving aside the rise in prices of steel and vegetables, the rate of inflation is very low. |
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| Therefore, we believe that there should be no change in interest rates in the near future. |
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