July ended with a significant change in debt markets. The US announced a 25% tariff on India and possible penalties for trade with Russia. At the same time, it signed trade agreements with key partners. Domestically, the RBI maintained its tight liquidity approach through VRR and VRRR auctions. Experts are carefully observing the RBI’s Monetary Policy Committee meeting in August. While no change in the repo rate is expected, discussions on inflation and growth will be important. Concerns about US tariffs, oil prices, and rupee depreciation persist. Still, some experts think the trade situation could improve with further negotiations. The RBI’s actions show a neutral position, indicating limited chances for rate cuts in the near term unless inflation drops significantly. However, weak credit demand and slowing growth might allow for future policy support. Most fund managers expect a steady market with selective increases in the yield curve. Fund recommendations include short to medium duration strategies such as corporate bond funds, money market funds, and banking and PSU debt funds. For longer-term investors who can take on moderate risk, dynamic bond funds may also be a good choice, given the ongoing global and domestic uncertainties.
