India’s bond market could be entering a more challenging phase as elevated global yields, rising crude oil prices and higher domestic inflation risks put pressure on the outlook for interest rates. After the easy gains from the recent bond rally, investors may now need to be more selective about duration and focus on the risks they are being compensated for.
Archit Shah, Chief Investment Officer at Zurich Kotak General Insurance, expects the RBI to potentially hike policy rates by 50-75 basis points, taking the repo rate towards 5.75-6% from the current 5.25%, if inflation, crude prices, the rupee and global yields remain under pressure.
