Mr. Prashant Pimple
Chief Investment Officer (CIO) - Fixed Income, Baroda BNP Paribas
Mr. Prashant Pimple has an overall experience of 24 years. He is esignated as Chief Investment Officer – Fixed Income of Baroda BNP Paribas Asset Management India Private Limited. His previous stint was with JM Financials AMC as CIO – Fixed Income. Prior to that, he has also worked with Nippon AMC, Reliance Mutual Fund. Mr. Prashant Pimple has done his B.Com, MMS (Finance), ACTM.
Academically, prashant is a Commerce Graduate from Sydenham College of Commerce and Economics and has completed his MBA from Jamnalal Bajaj Institute of Management Studies (JBIMS) and he has done ACTM, Chartered Treasury Manager course specializing in Treasury and Forex Management from The Institute of Chartered Financial Analyst of India.
Q1. Do you believe there's a chance that expectations for a rate cut could be delayed until calendar year 2025 due to the possibility that inflation might remain persistently higher than current estimates?
Headline inflation picked up above 5% in June-24 led by a sharp pickup in food prices. Whereas core inflation remained closer to historical lows. In Q2 FY25 inflation is expected to see a dip led by favourable base and post that inflation is expected to rise as support from base-effect wanes. RBI’s monetary policy focus is expected to remain on ensuring sustained moderation in inflation towards the 4%-target. Solely based on domestic inflation expectations the earliest RBI can cut interest rates is in Q4 FY25. By this period there will be greater clarity on food inflation risks and Fed policy.
Q2. What impact could the inclusion of Indian bonds in the JP Morgan Global Bond Index have on the money market and capital flows? How significant might this be for the interest rate landscape in India?
JP Morgan bond inclusion is expected to bring in approximately USD $20-$22 BN over next year or so in Indian G-secs. This inflow will certainly improve India’s forex inflows in addition to improving liquidity over a period. Positive flows will impact the interest rate sentiment and improvement in liquidity is expected to steepen the current flat yield curve thereby resulting in shorter end yields with downward bias. Both these factors are expected to have a positive impact on interest rate landscape in India.
Q3. Do you view the recent upward guidance from the RBI governor predicting 8% GDP growth for India as optimistic or realistic?
India’s growth story has been outlined with incorporation of structural shifts starting from adoption of GST regime, government’s thrust on capital expenditure, strong financial system driven by healthy corporate balance sheets. Impact of external headwinds on India’s growth has been limited as the government has taken proactive and balanced approach. One of the key highlights of India growth story is reflected in the robust services economy which has been supporting India GDP growth. Weak rural sentiment remains a risk for RBI’s growth projection of 8% but given India’s potential output growth 8% is achievable. Having said that we expect the divide between the GVA and GDP to continue for some time.
Q4. How do you anticipate foreign institutional investors (FIIs) will allocate funds into the Indian debt market?
In addition to JP Morgan inclusion led flows we are also witnessing flows in general from FPIs especially into Government securities market. We expect these flows to continue as expectations of global as well as local markets gets stronger.
Q5. Despite inflation easing, the US Federal Reserve has signaled that it will cut its key interest rate just once this year. What are your views on this?
The US economy has been facing one of the trickiest monetary policy dynamics. Inflation has eased but is still above its target range. Core inflation continues to remain sticky. The labour market has also started showing signs of normalization. But still cannot be termed as weak when compared to pre pandemic levels. In such a scenario the best bet that FED could possibly play out is to wait and watch. By Sep-2024 FED will have two more inflation prints and will have a better clarity on inflation trajectory. FED is cautious of early loosening.
Q6. What allocation strategy would you recommend for a conservative investor, with different time horizons: short-term (6 months to 1 year), medium-term (1 to 3 years), and long-term (5 years and beyond)?
Investor with short term investment horizon can positively consider investment in Money market and short duration category in light of our interest rate and liquidity outlook.
Investor with medium to long horizon can consider duration funds with varying ranges depending on the investors risk appetite.
