IFM Debt Outlook – May 2019

Policy Stance & Rationale:

• Economic activity is slowing down in both advanced (AE) & emerging economies (EME). Inflation continued to remain low due to slowing global growth.
• Bond yields softened in US, turned negative in Germany & Japan as central banks signaled softer stances.
• The second advanced estimates for 2018-19 by Central Statistics Office revised the GDP downwards to 7% from 7.2% earlier.
• RBI has kept the neutral stance with objective of meeting medium term target of inflation (CPI) of 4%.
• RBI has revised the inflation downwards to 2.4% in Q4:2018-19, 2.9-3% in H1:2019-20 & 3.5-3.8% in H2:2019:20.
• GDP growth for FY20 has been revised downwards to 7.2% from 7.4%.

Future Outlook

Global economy is slowing down. It is clearly showing the impact on domestic economic movement. Major central banks in the world are softening their stance. RBI has also softened the stance and has done 2 rate cuts in this calendar year so far. We are expecting more rate cuts to boost the economic growth. IFM expects yields will continue to soften. Thus, debt market is providing great investment opportunity at current movement.