Key Points
Sunil Subramaniam, MD & CEO, Sundaram Mutual, says because of reduction in the interest rates in the debt securities market, these balanced funds, which remain now the only way for a person to participate in a reducing debt market in a tax-efficient manner, is through hybrids..
So what has happened is that this year, the entire focus of people wanting to take advantage of interest rates has been through hybrid mutual funds, which have an equity plus debt combination because once you keep 65% in equity, so you have balanced advantage funds, aggressive hybrid funds, multi-asset allocation funds, bulk of them keep equity at 65% and balance they put in debt...
So it is a double-edged weapon in that sense, that people allocating their money into hybrids will mean that not only debt securities will get more subscription, but equities will also be more buying power from allocation of flows..
Second aspect is the fact that the finance minister has projected not only lower market borrowings, but a lower fiscal deficit with a confirmation that that 4.5 of FY25-26 will be held, means that from a rating perspective, if India's growth numbers start to look even better than they are, then there is a good chance for India upgrade to happen...
So, what is happening is that the capital allocation, I feel that within the infra space, the valuations are, I think, looking on the richer side.. I would expect capital allocators who actually look at valuations to allocate capital to shift money away from the infra space, albeit that the budget has been pro-infra, into the consumption because I believe those numbers are going to start looking better from an earning season perspective...
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