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Interest rate cycle close to peaking in India: Rajeev Radhakrishna

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Although the short-term market will be volatile with more spikes, the increase in duration will only be gradual, Rajeev Radhakrishnan, CIO-Debt at Asset Management Company, tells Saikat Das. As the US Federal Reserve raises interest rates, the strength of the dollar will weigh on emerging markets markets like India, says Radhakrishnan, who manages about ₹2.3 lakhcrore in assets. Edited excerpts:

What are the factors RBI Policy will strain next week?

For us, the main impact will come via currencies, which the policy committee should take into account. Dollar strength will weigh on us as we are net importers with above target consumer inflation and continued exposure to US dollar balance of payments balance of payments. The RBI is expected to remain focused on ensuring domestic inflation is closer to target.

liquidity has shrunk and slipped inside deficit. What are the options at RBI?

Much of the liquidity outflow is due to foreign exchange market intervention. This could stop for now if the intervention pattern changes. From a signaling point of view, the small amount of open market selling on the screen could stop. Today the banking system has excess SLR (Legal Liquidity Ratio) of 9%, which banks can use to obtain liquidity from RBI.

Can India set its own monetary policy course without being in step with global central banks?

While domestic inflation growth metrics will ultimately determine the direction of interest rates, it is unlikely that emerging markets will have full operational independence from Federal Reserve policy. Eventually, given the relatively open capital account, the dynamics of foreign exchange markets would have an impact on the design of domestic monetary and liquidity policies.

When the interest rate cycle is in an upswing, debt securities can only go down in value. What was the best way for you to contain the losses?

We are nearing the peak of the interest rate cycle in India. We have taken a slightly longer view on interest rates, having been conservative for a while. It is an opportunity for us to gradually add duration to our portfolio. Although the short-term market will be volatile with more spikes, our current bias is to increase duration only gradually. We are encouraged by the RBI’s clarity on keeping inflation close to target.

What’s your perm?

Up until five months ago, we were trading at the lower end of the duration band for most products. That would be slightly higher, with a trend that is currently being added incrementally.

What can create volatility in the bond market?

Excitement surrounding India’s inclusion in global bond indices coupled with evolving global scenarios will increase volatility. In addition, the market constantly adjusts to local inflation expectations. Our key interest rate expectations based on market prices are adjusted using the external key interest rate curve. Apart from that, the demand-supply equation has to be monitored in the second half.

What should the debt investor’s outlook look like?

Investors should invest in debt funds with two views. First, there will be short-term volatility through the end of this fiscal year. Second, we are nearing the end of the tightening cycle. The five-year government bond yield is 7.26%, which is quite attractive without the credit risk element. Investments should ideally be viewed from a three year perspective, which currently appears very cheap for government bonds.

What should debt investors do now?

We say investors should diversify into duration products with government bonds as an underlying, rather than investing 100% of their investable money. Do it in the next four to five months. This is perhaps the best option for investing in bonds under the current circumstances.

Will loan funds be revived?

Credit funds faltered, causing a crisis of investor confidence a few years ago. The search for high returns following the demonetization program had popularized loan funds. Today, triple-A rated bonds trade at zero differential to the sovereign gauge. Spreads on non-AAA bonds, which are similarly rated versus AAA bonds, remain unattractive. Once the spread returns, debt funds should regain popularity.

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AirPlus to Launch Medical Assessment Service

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AirPlus is adding a telemedical assistance service for customers whose travelers become ill while on business trips, the corporate payments provider announced.

AirPlus has partnered with insurance company Inter Partner Assistance to launch the service, which will be available on October 1st. AirPlus Company Account and Virtual Card users can book a phone or video session for an initial medical exam via AirPlus Travel Insurance using the Doctor Please app. The service is available 24/7 and in six languages.

“Sick business travelers are often unsure how to find the right doctor on site and how to make an appointment,” said AirPlus Marketing Director Michael Heilmann in a statement. “With just a few clicks, our customers are connected to a competent doctor who will advise them in the language of their choice without having to leave their accommodation.”

Eligible trips for the service must be no more than 90 days and must be at least 100 kilometers from the traveler’s home. The service is not available in Canada, China, Japan, Liechtenstein, Switzerland and the US, including Puerto Rico, according to AirPlus.

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Indices fall for seventh straight day, Sensex slips 188 points

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Stock market today, Sensex Nifty stock quotes, stock market news updates: Top-line indices on the BSE and National Stock Exchange (NSE) erased their morning gains to close about 0.3 percent lower on Thursday for the seventh consecutive session, weighed down by Asian Paints and select IT and financial stocks amid weak global signals .

The S&P BSE Sensex fell 188.32 points (0.33 percent) to 56,409.96, while the Nifty 50 fell 40.50 points (0.24 percent) to settle at 16,818.10. Both indexes had opened 0.9 percent higher earlier in the day and were up as much as 1 percent in early morning trade, with the Sensex hitting 57,166.14 and the broader Nifty 17,026.05. However, they gave up the winnings and became negative offers in the afternoon.

In the Sensex package, Asian Paints was the day’s top loser, falling over 4.5 percent. It was followed by Tech Mahindra, Titan Company, Kotak Mahindra Bank, Bajaj Finance, Tata Consultancy Services (TCS), Wipro, Bajaj Finserv and State Bank of India (SBI). In contrast, ITC, Dr. Reddy’s Laboratories, Tata Steel, Sun Pharmaceutical Industries, Nestle India, Mahindra & Mahindra (M&M), IndusInd Bank and NTPC were Thursday’s top gainers.

Among sector indices on NSE, the Nifty IT Index fell 0.92 percent, the Nifty Financial Services Index fell 0.51 percent and Bank Nifty fell 0.30 percent. On the other hand, Nifty Pharma rose 1.33 percent, Nifty Media rose 1.20 percent.

In the broader market, the S&P BSE MidCap Index was up 75.36 points (0.31 percent) to 24,512.97 and the S&P BSE SmallCap was up 176.47 points (0.63 percent) to 28,047.11. The volatility index on the NSE, or India VIX, fell 3.58 percent to 21.30.

In the future, market participants on the outcome of Monetary Policy Committee (MPC) Reserve Bank of India (RBI) meeting on Friday. RBI Governor Shakktanta Das will deliver a speech at 10:00 a.m. Friday, followed by a press conference at 12:00 p.m.

“The initial upsides of the domestic market were short-lived due to its weak global peers and the declining rupee. With the yield spread between India and the US falling to a multi-year low of 348 basis points, foreign investors are still exiting the Indian market. Markets are primed for a 50 basis point hike in the RBI amid the ongoing global trend of aggressive rate hikes. Investors eagerly await central bank intervention to support banks’ liquidity, curb currency depreciation and provide updates on their monetary policy stance and GDP prospects,” Vinod Nair, Research Director at Geojit Financial Services.

Global Markets (by AP)

European stocks slumped on Thursday and Asian markets were mixed after British Prime Minister Liz Truss defended a tax cut plan that unsettled investors. The London market benchmark fell 2.3 percent and Frankfurt was down 1.9 percent in early trade. Shanghai and Hong Kong also declined. Tokyo and Seoul advanced. Futures for Wall Street’s benchmark S&P 500 index fell 1.3 percent.

In early trade, London’s FTSE 100 fell to 6,846.34 and Frankfurt’s DAX to 11,957.72. The CAC 40 in Paris fell 1.8 percent to 5,660.81. On Wall Street, the future for the Dow Jones Industrial Average was down 1 percent.

In Asia, the Shanghai Composite Index closed up 0.1 percent at 3,041.20 after spending most of the day in positive territory. Tokyo’s Nikkei 225 rose 1 percent to 26,422.05, while Hong Kong’s Hang Seng slipped 0.5 percent to 17,165.87.

Seoul’s Kospi rose less than 0.1 percent to 2,170.93 and Sydney’s S&P ASX 200 rose 1.4 percent to 6,555.00.

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Citi’s top stock strategist expects a market risk-on rally in the fourth quarter

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