As the US Federal Reserve signalled a potential end to interest rate hikes, the question arises, will interest rates in India follow suit? With the Reserve Bank of India (RBI) already on pause, it is worth considering if this spells a potential opportunity for debt fund investors. Suyash Choudhary, Head of Fixed Income at Bandhan Mutual Fund stated that India is currently at the peak of the rate hike cycle and investors should look at bond funds for investment.

"In the last 1.5 years, the bond market has been more volatile than any other asset classes, making it a more attractive option for investors," he told CNBC-TV18.

“Rate hike expectations globally are now peaking and they have matured. India has compressed its external account very remarkably. So, external imbalances that faced us last year are out and inflation is on a downward trajectory. So, we are at the top of a rate hike cycle. Investors should be looking at quality fixed income, especially in the three to six area in our view. This would curb reinvestment risk as the cycle matures and some modest amount of rate cuts come through even in India, probably over 2024," he said.

Lakshmi Iyer, CIO (Debt) and Head of Products at Kotak Mahindra Asset Management stated that the momentum in the Indian bond market seems to be sustaining, with yields coming closer to 7 percent mark.

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Iyer is not rooting for a rate cut and believes that interest rates have plateaued.

On the other hand, Indranil Sengupta from CLSA India believes that the RBI will cut rates by 100 basis points from October 2023 onwards. He is confident that the central bank is looking for a 100 basis point rate cut from October.

“I am very confident that the RBI will not want to sit at 6.50 percent rate, given where the global economy is and where we are in terms of growth. Inflation will also be coming down in the coming months. We are looking at 100 basis point rate cut," Sengupta told CNBC-TV18.

Sengupta believes that RBI can easily come down to a 5.5-5.75 percent interest rate. He also pointed out that the rupee appreciated when RBI slashed rates.

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(Edited by : Anshul)