investment trends: Jayesh Mehta on fixed and equity investments and changing trends

“Capex mainly happens on the government side. As soon as private investment spending picks up, we may see both demand for corporate credit and issuance of corporate bonds increase substantially,” says
Jayesh Mehta, MD and National Treasurer, Bank of America

Equity market watchers are still wondering if there is a change in the trend and if we will necessarily have to have some of the investment in fixed income, something that could be completely ignored over the past two years. .

Indians have always invested more in fixed income securities, but until now we had deposits that always yielded more than government bonds as well as corporate bonds. Therefore, bonds have never been very attractive.

For the first time after 1996, 1997 for a constant period, we have a lower deposit rate than government bonds and corporate bonds and that is why we see not only corporate bonds , even the investments of individuals on the stock market in The financial sector, which was entirely monopolized by term deposits, is in full mutation.

I would say it is good for the financial market and the capital market. Now of course people can go and wonder why FD bank should be lower than government bonds, the credit rating is much lower than government bonds and things like that, but let’s not forget that banking is a service industry and so rather than competing on fixed deposit rates they should be competing on service and this is happening on a global scale. In India, it may still take time. Again, we see deposits increasing. The only concern is that once the deposit rate breaks through the corporate bond level, it would slow financial instrument investment in stocks and fixed income securities.

Has retail investor penetration started to improve?

We see very clearly from the data for equity mutual funds and also government and state development bonds, that there has been a lot of demand from investors through mutual funds, that which is the right way to go, especially for state development bonds as well.

When it comes to corporate bonds, the challenge for mutual funds is that we don’t have enough issuers. NPF is a different segment, but when you’re talking about corporate bonds, people also like to have AAA manufacturing companies in their portfolio and that’s quite noticeable if you see bank credit as well. Business credit is not really growing much and the same is reflected on the bond side. The show isn’t really that high and that’s what we’ll have to wait and watch as this issue starts happening.

So, generally speaking, investment spending mostly occurs on the government side. As soon as private investment increases, we may see both demand for corporate credit and corporate bond issuance increase substantially.