Equities continue to appear less attractive than bonds
However, experts also point out that the correlation between the bond and equity markets of India differs substantially than their global standings where the 30-year-long bull run in the bond market is expected to end with a substantial outflow making its way to equities.
“The Indian debt market is driven by institutional participation, unlike equities, where retail investors are generally seen giving higher allocations,” said Mahendra Jajoo, ED and CIO-fixed income with Pramerica Mutual Fund.
As per Laxmi Iyer, head of fixed income with Kotak Mutual Fund, unlike the global scenario wherein the switch between the equity and bond market rides on the ‘risk-on’ or ‘risk-off’ mode, in India, both markets have lower negative correlation.
“While the 10-year benchmark is seen sliding down towards 7.5% towards the later part of 2013, a more conclusive bottoming out of the Indian equity market may lead to some money moving towards equities,” added Iyer.
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