Be judicious in asset allocation

Both debt and equity look unattractive at the moment, but one cannot stop investing

The situation in India’s debt markets is puzzling. The Reserve Bank of India (RBI) has cut rates multiple times in succession. That should in general, be good for debt investors (and for equity). However, the RBI admits that the policy rate cuts have not been transmitted. Bond yields have barely fallen while banks have marginally reduced commercial rates. 

At the same time, there has been an increasing trend of defaults. According to a Bloomberg study, there have been a record Rs 7,600 crore worth of defaults in 2019, and the defaulting entities have roughly 17x that amount outstanding in loans. What’s