Why one of India’s top bond fund managers is hoarding cash

According to Vikram Chopra at DSP Investment Managers Pvt Ltd, the cash position now accounts for up to 30% of the assets under management in various funds, as against 0% at the beginning of the year.

Mumbai-based Chopra said in an interview that the drive in cash comes in the form of rising commodity prices and companies reflect the impact in their results and outlook. “The market will try to see if this inflationary pressure will be passed on to the consumer, whether the consumer can absorb it, and if growth remains strong, there is a case for normalizing rates,” he said.

Investors around the world are gearing up for a rapid rate-growth cycle as pressures appear on everything from energy costs to food and housing prices. Reserve Bank of India Governor Shaktikanta Das this week expressed concern over the country’s core inflation, as the CPI jumps to fuel shock waves in markets in major economies of the US, China and Japan.

Traders will get their next read on India’s inflation this Friday, with economists forecasting a 4.5% jump in retail prices in October from the previous month. This comes after the retail CPI moved back within the RBI’s tolerance band of 2-6% in recent months.

“Yield will gradually go higher to compensate for inflation above 5%. It looks like at least 5-5.5% over the next six months, and it is expected that the growth will continue to improve significantly as RBI estimates,” Chopra said.

According to Kaushik Das, India’s chief economist at Deutsche Bank AG, while a cut in fuel taxes this month could help ease the pressure, higher prices of non-energy goods could offset the impact.

In addition to increasing cash holdings, Chopra is also investing more in the belly of the yield curve, while mitigating the risk of short-term debt that could continue to sell as central bank incentives withdraw. He manages nearly $600 million in assets, including the DSP Government Securities Fund, which has outperformed 96% of peers over the past three years, according to data compiled by Bloomberg.

The 2026-2029 bonds offer favorable carry gains from the roll-down strategy, where investors hold the notes for coupon payments and then sell them for capital gains, Chopra said.

This story has been published without modification in text from a wire agency feed. Only the title has been changed.