Mr. Devang Shah
Head – Fixed Income India, Axis Mutual Fund
Devang Shah is the Head of Fixed Income at Axis AMC. He joined the fund house in 2012 as a Fund Manager and was elevated to the position of Head – Fixed Income in 2024.
He has over two decades of industry experience of which, 18 years have been spent in the Mutual Fund industry. His core responsibilities include managing top quartile performance for all Fixed Income Funds & managing client relationship. Additionally, he has been actively involved in ideation and determining the investment strategy for fixed income funds.
Prior to joining Axis AMC, he was associated with ICICI Prudential AMC (2008-2012) as a Fund Manager and was also the head of credit. He has also worked with Deutsche AMC and PwC.
Educational Qualification: B.Com from Mumbai University and a Gold Medallist in Financial Management, Associate Member of ICAI
Q1. Given rising global uncertainty-from the Israel-Iran tensions to the ongoing Russia-Ukraine war-how should fixed income investors position themselves to manage risks around global inflation, volatile oil prices, and shifts in safe-haven flows?
Ans: Geopolitical conflicts have been on the rise in the last few years. The unfortunate part is one cannot control these external risks. This is where investors can diversify their asset allocation and participate in fixed income funds. The start of the rate cycle proved beneficial for long duration funds. However, I believe now is the time to participate in short term funds and these can outperform long bonds from risk risk-reward perspective due to a shallow rate cut cycle, lower OMO purchases in the second half of the year and a shift in focus to Govt Debt to GDP targets.
Q2. With the RBI’s recent 50 bps rate cut, how do you interpret the central bank’s message to the market? Do you see this move as a pre-emptive easing to support growth, and how might it reshape fixed income strategies going forward?
Ans: The 50 bps repo rate cut was larger than expected but the change in stance to neutral and the CRR cut was a surprise for the markets. The central bank has been proactively managing liquidity and had already announced measures so there were no expectations on this front from the policy. I had been of the view that this current cycle would be shallow and that’s exactly how the cycle played out. The central bank is definitely prioritising growth while inflation is well under control. As indicated in most of our communication pieces, a significant part of the bond market rally is behind us and there would be limited rate cuts and that too if we see weaker growth. Rates will stay lower for longer. I expect macro indicators like GDP, CPI to remain soft for FY26. Consequently, there is nothing that can lead to significant upside in yields. I expect 1-5-year corporate bonds to rally and outperform long bonds on a risk reward perspective.
Q3. The RBI has recently discontinued daily Variable Rate Repo (VRR) auctions in light of a ₹3 lakh crore liquidity surplus. How do you interpret this move, and what does it signal about the RBI’s evolving liquidity stance and its potential impact on short-term rates?
Ans: The central bank had introduced daily VRR auctions on January 16, 2025, to address temporary liquidity tightness caused by tax-related outflows and foreign exchange interventions. However, with liquidity conditions now easing, the RBI is shifting its focus to stabilising overnight money market rates, which have been trending lower due to excess funds in the system.
We believe that these daily VRR are not the need of the hour and there is enough liquidity in the system.
Q4. India’s 10-year benchmark yield is currently around 6.31% as of July 15th. How are you positioning your portfolio across the curve in this environment? Are there specific segments-short, medium, or long-that offer better value at current levels?
Ans: After the larger-than-expected repo rate cut, shift to neutral stance from accommodative and unexpected CRR cut, markets remain in neutral. Liquidity remains abundant and we do not anticipate further cuts in the next 3-6 months. Analyzing macro data, lower GDP, softer CPI, lower for longer rates and abundant liquidity, we expect 1-5-year corporate bonds to rally and outperform long bonds on a risk reward perspective and foresee a limited rally in government bonds going forward. In fact we have shifted our allocation from higher government bonds to higher corporate bonds.
Q5. The RBI has revised its inflation projection from 4% to 3.7%. In your view, does it create room for more policy easing in the coming quarters?
Ans: As against the central banks inflation projection, headline inflation is already at 2.1% and I do not expect it to remain lower at this level for long. I believe that the RBI has frontloaded the interest rate cuts for this cycle; rates will remain low, and liquidity will remain abundant. While inflation projection for Q1CY26 is above 4%, we believe that unless we see big growth shocks there will be limited room for easing.
Q6. In your opinion, what could be the key triggers that might lead the RBI to consider another rate cut in the near term?
Ans: As mentioned earlier, I do not foresee further rate cuts in this year. However if the RBI was to cut rates it would be on account of a large slowdown in growth.
Note: Views provided above are based on information in the public domain and subject to change. Investors are requested to consult their mutual fund distributor for any investment decisions.
Please note we have published the answers as it is received from the Fund Manager of Axis.
