SBI MF turns to cash on bets RBI will hike rates

India’s biggest Asset Manager, SBI Funds Management Pvt Ltd is increasing its cash reserves on speculation of the interest rate hike in the future by RBI, seeing the current inflation condition.

CIO’s words: 

“Growth estimates getting better and signs that there could be a dislocation in prices has forced us to reassess,” said Rajeev Radhakrishnan, CIO for fixed income at SBI Funds,

Justification

• The surge in interest rate will in turn increase the Yield on bonds, reaping better returns over future investments.

• RBI kept its key Interest Rate unchanged for a third straight meeting, asked banks to keep extra cash aside to soak excess liquidity.

• Yields on India’s benchmark 10-year bond are on the rise, advancing 26 basis points from their May low.

• The cash component of the SBI Dynamic fund’s, holdings rose to 17.5% of its assets under management at July end saw the biggest increase among other funds.