Biggest Fund of India Turns To Cash

India’s largest asset manager, SBI Funds Management Pvt., is strengthening its cash holdings as it predicts the central bank will continue to increase borrowing costs.

This move aims to enable the deployment of funds at higher yields. The company has been gradually reducing the duration of its portfolio since May, opting to maintain readily available cash for more favorable investment opportunities. This strategy comes amidst a sudden surge in inflation, which has sparked discussions about the likelihood of additional rate hikes.

Rajeev Radhakrishnan, Chief Investment Officer for fixed income at SBI Funds, explained, “Growth estimates are improving, and the possibility of price dislocation has prompted us to reevaluate our approach. Our focus is on reducing duration, which has led us to hold more cash.”

Notably, SBI Funds Management stands out as one of the few investment managers advocating for a rate increase. This is in contrast to the majority of market participants who…

In its recent meeting, the Reserve Bank of India chose to maintain its key interest rate for the third consecutive time.

The central bank also instructed banks to set aside additional funds to manage excess liquidity, indicating a heightened watchfulness against surging prices. The notable rise in July’s prices led economists to revise their inflation projections, while yields reached their highest point since

April in the previous week. Radhakrishnan’s objective is to retain a position that aligns with these developments.