Volatile market conditions call for a strong barbell strategy and top-tier credit, according to Devang Shah of Axis Mutual Funds.
Published on September 6, 2025
In the ever-evolving world of investments, Axis Mutual Funds is steering a strategic course to manage risks and seize opportunities. The fund's active management approach is guided by diversification, liquidity management, and sensitivity to macro and market signals.
The investment landscape is fraught with potential pitfalls. Primary risks to the outlook include currency volatility, fiscal slippages from GST rationalisation, unpredictable Foreign Portfolio Investor (FPI) flows, uncertainties in global growth, and impacts from geopolitical tensions.
To navigate these challenges, Axis Mutual Funds has adopted a prudent stance. The fund maintains a reduced duration exposure compared to earlier in 2025, favouring accrual-based portfolios with selective credit exposure. This strategy aims to manage risk effectively while seeking incremental yield.
Credit exposure should remain predominantly high quality, with tactical allocations to select lower-rated credits where risks are well-compensated. Careful credit selection is critical in the current credit environment, despite improvements in corporate balance sheets.
Selective credit risk funds offer attractive tactical opportunities. Given the tapering of the structural rally in long-duration gilts, emphasis is shifting towards accrual-focused short and medium-term funds.
To manage reinvestment risk, laddering of maturities and an active management approach are suggested. A barbell strategy with short- to medium-duration corporate accrual bonds and some exposure to longer-duration government securities can balance yield and risk.
In the 1-4-year segment, credit spreads compression opportunities exist, offering higher carry with manageable risks.
Fund managers associated with the Reserve Bank of India's issuance program in H2 2025 are primarily RBI-appointed officials and primary dealers. They generally view the demand-supply balance in the government securities market as stable but closely monitor supply trajectories to assess impact on yields and liquidity.
As we navigate the complexities of the investment world, Axis Mutual Funds remains committed to delivering value to its investors through thoughtful, strategic decision-making and a focus on risk management.
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