This includes rising crude oil prices

Bonds don’t like fiscal indiscipline and this is reflected in the rise in yields, says Pankaj Sharma, chief investment officer (fixed income), DSP BlackRock Mutual Fund.A reversal in the interest rate stance may happen sooner than later, Sharma tells.There is a risk on account of the effect of the proposed increase in minimum support prices and fiscal slippage in an election heavy period and its effect on inflation.The bond market likes predictability.Given the uncertainties, a higher volatility is likely to persist.What is the trajectory of interest rates? Some analysts expect the Reserve Bank to tighten rates between October and December, or even before.Macro variables have moved towards the negative territory over the past two months.This includes rising crude oil prices, yields in developed markets moving north, fiscal slippage, and prospects of a change in MSP mechanism.We maintain a bias for reversal in the interest rate stance sooner than later.Bond yields have been pricing the same and the policy outcome for now will resist hardening of yields from the current levels.We expect gilt yields to come under pressure as the government auctions resume in April.The consumer price index (CPI) based inflation rose to 5.07 per cent in January. Will there be more inflationary pressures?As the growth momentum reverses benefiting from re monetisation, it will be accompanied by a rise in inflation.Higher CPI prints in the recent past can also Prada Outlet be attributed to seasonality as well as statistical factors.Statistical factors have a measured shelf life and wane out over a period of four quarters.So, a rise in inflation, especially in the first quarter of FY19, will be predominantly driven by the base effect.Two dominant factors that will drive the near term inflation https://www.pradasoutletcheap.com dynamics are crude oil prices and MSPs for kharif crops, which will be defined in Q1.Foreign portfolio investors (FPIs) have been net buyers in the debt markets this year. Do you see this trend continuing?High participation by FPIs in the Indian debt markets was driven by high carry and a stable USD/INR exchange rate.For an offshore investor, the rupee appreciation has contributed more towards total returns against rates/carry.A stable currency, higher (real) rates, and a sound macroeconomic environment form an ideal combination for FPI inflows.Over the past few years we have demonstrated the best of these combinations.As things stand, FPIs have been utilising more than 90 per cent of the debt limits.If we are able to demonstrate the ideal combination, then opening up of further limits will aid a strong trend of FPI inflows in debt..

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