21 hrs ago
RBI Rate Hike Spurs Calls for Bonds and ETFs
The Reserve Bank of India raised its main interest rate by a small amount.
Some analysts think it may raise rates again.
Higher rates could affect share prices and bond yields.
One expert says investors should keep most of their money in shares, but use ETFs instead of picking individual stocks.
He suggests putting a smaller portion into long-term government-backed bonds.
He predicts the Nifty 50 and Nifty 100 ETFs could gain 15% and 18% over five to six months.
He also predicts bonds could return 15% a year over two years.
These are expert forecasts, not guaranteed results.
The Reserve Bank of India raised its repo rate by 25 basis points to 5.5%, while changing its stance to calibrated tightening.
Jefferies analyst Prakhar Sharma said the stance change raised expectations for further rate hikes to 75–100 basis points, up from 50.
SEBI-registered analyst Anuj Gupta expects up to two more hikes in the financial year, potentially taking the repo rate to around 6%.
Amit Goel recommends a 75% equity and 25% bond allocation, using Nifty 50 and Nifty 100 ETFs rather than individual stocks.
Goel forecasts ETF returns of 15% and 18% over five to six months, respectively, and a 15% annualized return on long-term government-backed bonds held for two years.
- Who
- The Reserve Bank of India, with forecasts and investment views from Jefferies analyst Prakhar Sharma, SEBI-registered analyst Anuj Gupta, and PACE 360 strategist Amit Goel.
- What
- The RBI raised the repo rate by 25 basis points to 5.5%; analysts discussed further hikes and investment allocations to ETFs and government-backed bonds.
- Where
- India.
- When
- The rate decision was announced on Wednesday; the article does not provide a date.
- Why
- The RBI changed its stance to calibrated tightening, prompting expectations of further rate increases and advice to reconsider portfolio allocations.
Key facts
- Repo rate after hike
- 5.5%, following a 25-basis-point increase.
- Jefferies rate-hike expectation
- 75–100 basis points of tightening, up from 50 basis points.
- Anuj Gupta forecast
- Up to two more hikes in the financial year, potentially taking the repo rate to around 6%.
- Suggested allocation
- 75% equities and 25% long-term government-backed bonds, according to Amit Goel.
- ETF return forecasts
- 15% for the Nifty 50 ETF and 18% for the Nifty 100 ETF over five to six months, as forecast by Goel.
- Bond return forecast
- 15% compound annual growth rate over two years, as forecast by Goel.
- Bond-buying period advised
- Goel advised buying long-term government-backed bonds through the end of November 2026, then reviewing the strategy.
Quotes
Prakhar Sharma
Bank Analyst at Jefferies
“One can exit stocks, but not the equities. I would suggest a 75-25 exposure to equities and bonds, but by equities, I mean ETFs. The market is about to make its bottom, but not before breaking below 22,000. However, after the bottom, we are expecting a sharp rebound. So, large-caps should be preferred, and I advise investors to invest in the Nifty 50 ETF and the Nifty 100 ETF. In the next five to six months, they can expect around 15% and 18% return by putting money in these two ETFs.”
livemint.com
“RBI's 25 bps rate hike to 5.5% was in line with expectations, but the stance change to calibrated tightening lifts consensus rate hike expectations to 75-100 bps (from 50 bps).”
livemint.com
Sources
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