Mr R Sivakumar

Head - Fixed Income. Axis MF

R Sivakumar is the Head - Fixed Income at Axis AMC. Siva has over two decades of experience in the Indian asset management industry working across asset classes and functions. He was part of the start up team at Axis joining in August 2009 looking after products and portfolio management services. He was responsible for leading the launch of Axis' signature & award-winning hybrid funds. In September 2010 he was promoted to Head - Fixed Income. He is responsible for the overall investment strategy, performance and risk management across fixed income investments.

Prior to Axis AMC, he was associated with Fortis Investments (formerly ABN AMRO AMC) where he held multiple positions chiefly as a Fund Manager - Fixed Income. He also led products, and - in 2009 - was appointed Chief Operating Officer becoming the youngest person in the asset management industry in that role. He has also worked with Sundaram AMC as Fund Manager – Fixed Income and with Zurich India AMC as Research Analyst.

Qualification: - Bachelor of Technology from IIT Madras, PGDM from IIM Ahmedabad.

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Q: While the focus has been on the equity markets, please tell us what is happening on the debt markets?
Answer:
While the entire focus has been on the equity markets, a lot has happened in the debt markets too. The RBI has been very active in responding to the situation and has ensured the system is abundant with liquidity. Some major action points from the debt market are reduction in key policy rates such as Repo rate by 75 bps and Reverse repo rate by a cumulative 115 bps over the past 1 month. What this effectively means is that RBI has made it cheaper for banks to borrow money for onward lending and also ensuring that it dis-incentivizes banks from keeping excess funds with the RBI.

Q: Recently, the RBI has reduced the key interest rates. What does this mean for a debt fund investor?
Answer:
A reduction in interest rates will affect different types of debt funds differently depending upon the portfolio. A low interest rate environment will affect different types of debt funds depending upon whether their portfolio is oriented towards accrual or duration. There are funds such as that seek to earn returns both from an appreciation in the value of the instruments along with coupon interest income. An interest rate cut will affect the shorter end of the yield curve negatively as lower rates and better liquidity will keep yields lower while the longer end of the yield curve will benefit as capital gains arising from yield.

Q: The small savings rates were also reduced by the government. Does this mean that risk averse investors should now be looking at debt funds?
Answer:
The rate of various small savings schemes has been reduced by up to 70 bps -140 bps. This is a positive move as it will bring down the deposit rates in the banking system. Historically, deposit rates on small saving funds have always kept a floor for borrowing and this was a cause of concern for banks. With this move, the post-tax returns on most of these investments becomes unproductive. Investors looking to part their surplus money should consider fixed income mutual fund products in the liquid, ultra short and money market category. The returns in these products are not only market linked but they also have the benefit of indexation.

Q: A lot of fear is there that a lot of stress will be come on companies going forward and there would be also risk of rising NPAs. What is your opinion on the same?
Answer:
The RBI has done a lot to ensure that the risk on the financial system is minimized. From permitting Banks to granting a moratorium, to extending time period to classify standard assets as NPA, RBI is leaving no stone unturned to ease the pain. But a lot of this also depends on how much time we spend under lockdown. If we are able to contain the spread of the virus, then we might see a recovery quicker than expected which will means businesses getting back on track and thereby easing the pressure on the banking system.

Q: What is your assessment of the government measures taken to provide relief to the economy? Is it enough and what further needs to be done?
Answer:
The government put in place emergency measures including a massive Rs. 1.7 lakh crore package. The relief measures included direct cash transfers (under the DBT or Direct Benefit Transfer scheme) and food security-related steps aimed at giving relief to the poor workers hit by the countrywide lockdown. The RBI also pulled out all the stops reducing benchmark rates in an attempt to cushion the economy. We will see continue to see strong actions by government and central banks around to world to help populations and businesses manage the economic hit of the lock downs.

Q: For a risk averse investor, what would you investment advice if the holding is short, medium and long term?
Answer:
For a risk averse investor, risk should be the utmost consideration while picking a fixed income fund to invest in. For investors investing for the short term, liquid and ultra short funds are better suited investment options. While for risk averse long term investors, playing duration via G-Sec and AAA bonds is the ideal investment option. In any time period, the quality of the portfolio should be of paramount importance before investing in any debt mutual fund.

Disclaimer
Source: Axis MF Research

Sector(s) / Stock(s)/ Issuer(s) / Top instruments with increased or decreased exposure mentioned above are for the purpose of disclosure of the portfolio of the Scheme(s) and should not be construed as recommendation to buy/sell/ hold.This interview represents the views of Axis Asset Management Co. Ltd. and must not be taken as the basis for an investment decision. Neither Axis Mutual Fund, Axis Mutual Fund Trustee Limited nor Axis Asset Management Company Limited, its Directors or associates shall be liable for any damages including lost revenue or lost profits that may arise from the use of the information contained herein. No representation or warranty is made as to the accuracy, completeness or fairness of the information and opinions contained herein. The material is prepared for general communication and should not be treated as research report. The data used in this material is obtained by Axis AMC from the sources which it considers reliable. While utmost care has been exercised while preparing this document, Axis AMC does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Investors are requested to consult their financial, tax and other advisors before taking any investment decision(s). The AMC reserves the right to make modifications and alterations to this statement as may be required from time to time.

Axis Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Ltd. (liability restricted to Rs. 1 Lakh). Trustee: Axis Mutual Fund Trustee Ltd. Investment Manager: Axis Asset Management Co. Ltd. (the AMC) Risk Factors: Axis Bank Limited is not liable or responsible for any loss or shortfall resulting from the operation of the scheme.

The information set out above is included for general information purposes only and does not constitute legal or tax advice. In view of the individual nature of the tax consequences, each investor is advised to consult his or her own tax consultant with respect to specific tax implications arising out of their participation in the Scheme. Income Tax benefits to the mutual fund & to the unit holder is in accordance with the prevailing tax laws as certified by the mutual funds consultant. Any action taken by you on the basis of the information contained herein is your responsibility alone. Axis Mutual Fund will not be liable in any manner for the consequences of such action taken by you. The information contained herein is not intended as an offer or solicitation for the purchase and sales of any schemes of Axis Mutual Fund.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

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