Mr. Avnish Jain

Head - Fixed Income, Canara Robeco MF

Mr. Avnish Jain is the Head of Fixed Income at Canara Robeco Asset Management Company, Robeco’s joint venture in India. Avnish with over 25 years of experience across many segments of the industry is actively involved in managing the fixed income funds which include Canara Robeco Income Fund, Canara Robeco Corporate Bond Fund , Canara Robeco Conservative Hybrid Fund and Canara Robeco Equity Hybrid Fund.

Prior to joining Canara Robeco, Avnish was a Senior Fund Manager with ICICI Prudential AMC.

His stint also includes, Head of Fixed Income with Deutsche Asset Management, Senior Consultant - Professional Services with Misys Software Solutions, Head of Trading with Yes Bank, Senior Trader-Proprietary Trading with ICICI Bank and Senior Analyst with UTI Securities Exchange Ltd.

Avnish Jain has done his B.Tech from IIT Kharagpur and post-graduation from IIM Kolkata.

Q1. The repo rate has now been increased by a cumulative 250 bps since April 2022. Further, the effective policy rate has undergone an increase of 315bps. How can it impact the investors to an extent looking at the current market? Are you expecting a reversal in the short to medium term?

The rate hikes in last 1 year have been unprecedented driven by inflationary pressures globally as well locally. Markets tend to adjust to financial tightening well in advance, incorporating both rate hikes already delivered as well future expectations. The current yield curve has flattened considerably with 1 yr tbill around 7.30% and 10Y G-SEC around 7.47% (annualised). Corporate bond yield curve is similar. The impact on funds has already been felt in last one year. We believe most of market adjustment has already been done and hence there should not be any major uptick in yields from current levels. In terms of future direction, it is generally expected that RBI may raise repo rate by 25bps in April 2023 policy, and pause thereafter. Considering that the inflation trajectory (as per RBI projections) does not fall below 5% in FY2024, we do not anticipate any rate easing in FY2024 (barring sharp drop in inflation due to global factors). Hence markets may continue to trade in range in short to medium term.

Q2: Do you suggest avoiding some debt funds noting the current fluctuations in the debt markets? What is your recommendation for long-term debt investors whether it is the right time to invest?

Markets seems to have adjusted to the rate hikes delivered in past 1 year as well as expected rate hikes to come. There has been sharp adjustment in rates, especially in the short end of segment. From hereon, we expect markets to remain range bound and consolidate at current levels as we do not expect any rate easing measures in short to medium term. At current levels, long term debt investors can increase allocation to fund categories like Banking & PSU Debt funds and Corporate Debt funds.

Q3: What are the major challenges you face while managing liquidity risk in your portfolio?

Liquidity risk management is an important part of overall portfolio management by the fund manager. Liquidity risk can be managed by keeping high proportion of assets in cash, near cash instruments. Further highly liquid assets like government bonds, tbills and AAA/A1+ in the portfolio aid in managing liquidity in the portfolio. Most of our debt funds are predominantly invested in TBills/G-SECs/ AAA papers, and hence we do not anticipate any major liquidity risk in the portfolios.

Q4: Debt market is still a task to understand for many investors except for some. With your experience what can be a few key pointers before picking a right debt mutual fund for oneself?

Its majorly the time horizon of the investment and the risk taking ability of the investor which should decide the debt fund which needs to invested in.

Q5: The gross GST revenue collection for the month of January 2023 accounted for Rs. 1,55,922 Crore (second highest ever). How will this impact the debt market?

GST revenue collections have been robust throughout FY2023. A higher GST collection could likely reduce overall government borrowings as well improve government finances, leading to lower fiscal deficit. A lower fiscal deficit, ceteris paribus, generally is positive for debt markets and may lead to rates trending lower as government borrowing pressure eases. Further drop in government rates impact rates in other parts of financial systems and overall have a positive impact on other economic parameters like growth and inflation as well.

Q6: How did the previous year go for you as a fund manager? What were your successes and what portfolio enhancements would you make?

FY2023 was extremely challenging year for debt funds as an unprecedented rate hike cycle, globally as well locally, had to be managed. Geo-political upheavals further added to the uncertainty. In this scenario, managing liquidity in the portfolio was of upmost importance, as it may be required, in case of unforeseen circumstances leading to redemption pressures. Credit risk could also have arisen, however, the nature of our portfolios (mainly in Tbills/GSECs/AAA assets) means that credit risk was minimal whilst ensuring ample liquidity for any unforeseen requirements. With focus on high quality portfolios, our portfolio strategy looks to manage liquidity and interest rate risk to deliver superior risk adjusted returns for investors.

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