'Corporate bonds expected to outperform gilts'

By Our Corporate Reporter

CHENNAI, APRIL 22. The current negative sentiment prevailing in the equity market is likely to subside in the next 2-3 months and a positive outlook can emerge if and when there is recovery in both domestic and global economies, according to Sundaram Newton Asset Management Company (AMC), manager of Sundaram Mutual Fund schemes.

In its latest fact sheet the AMC has stated that current stock valuations look cheap and there are reasons to believe that the fundamentals may weaken before turning positive.

On the debt market front, the AMC does not expect any sharp increase in industrial growth over the next few months, ruling out any increase in interest rates. However, the auction of bonds with maturities above 10 years by the Centre will cap the upside in that segment.

In the immediate term, as call rates fall, short and medium maturities will outperform. The AMC expects corporate bonds to outperform gilts.

The AMC continued its strategy of increasing exposure to corporate bonds at the expense of gilts last month and its exposure to AAA rated corporate paper rose to 61 per cent from 45.3 per cent.

On the equity segment the AMC did not make any significant changes in portfolio expect for a minor reduction in exposure to the banking sector.

This was due to the AMC's concern that the current crisis on the bourses may affect both the fundamentals and the sentiments of banks.

With a view to exploiting the uncertain environment, the AMC would be deploying a part of its cash position in buying defensive companies that had fallen substantially in the recent past.

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Section  : Business
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