As Rates Fall, Investors Look for Yield in India

Global money continues to flow into India as the Nifty raised for the 5th consecutive month. The market zoomed to all-time highs on account of strong global cues, earnings boost and expectation of good monsoon. The most important characteristic, however, is the retention of investors’ interest in select scrip’s and the bullish undercurrents ruling the sentiment. The retention and rising investor interest is visible in the surge in mutual funds folios in FY17 as retail investors flocked to equity mutual funds. The lull in gold and real estate is also a reason for such an avalanche here. On the economy front, Mar IIP rebounded to 2.7% vs 1.9% in February as manufacturing sector remains a laggard. Manufacturing sector declined by 1.2% in March which is a 3 month low. Mining rose to 9.7% vs 4.6% in Feb while electricity inched up to 6.2% (vs 1.2% in February.)

The Prime India Fund continued its strong run. The long Treasuries (+1.98%) outperformed intermediate Treasuries (+0.40%) as the U.S. Treasury curve flattened. The U.S. Treasuries returned 0.65% during the month as the yield on the 10-year U.S. Treasury declined to 2.20% from 2.28% at the end of April. Credit returned 1.08% for the month, outperforming Treasuries by 33 basis points on a duration-adjusted basis.

Despite the persistent flow of news across a multitude of topics, ranging from U.S. monetary policy through rather shocking displays of political commentary from “celebrities,” fixed income markets continue to digest these factors in an orderly fashion. While the appointment of a special counsel to investigate the possibility of foreign interference in U.S. elections sparked one sloppy trading session, it did little to change the direction of U.S. credit markets.

The PAM Bond Fund and PIOL Multicap Fund can be found on Bloomberg with the following Bloomberg tickers.

Bloomberg:
PAMGIGF MP
PIEXIMC MP