India's interest rates to remain range-bound amid global inflation pressures: Motilal Oswal CEO

India's interest rates are unlikely to see a significant decrease in the immediate future, according to Ashish Shanker, Managing Director and CEO of Motilal Oswal Private Wealth. He explained that persistent global and domestic inflationary pressures, particularly from imported goods, will keep rates range-bound rather than triggering a sharp decline.

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In India, over time rates should definitely go down as we become bigger and bigger in terms of size and scale. However, I don't see it happening in the near term because there are inflationary pressures globally and domestically.

Shanker noted that while India's inclusion in global bond indices is attracting substantial foreign investment into government securities, this alone will not lead to an immediate, sharp fall in yields. He anticipates that over time, as India's economy grows in size and scale, interest rates should eventually decrease. However, he stressed that this is not expected to happen in the near term.

For retail investors navigating the current market, Shanker recommended focusing on medium-term (3 to 5 years) yield-to-maturity products, high-grade corporate bonds, and government securities (G-Secs). He also emphasized the importance of dynamic asset allocation funds to effectively manage rapidly changing market conditions.

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As India gets included in the global index, you will see more flows coming into Indian government bonds and you will see that the Indian government bonds remain range-bound but with a downward bias. But I don't see rates going down in a hurry.

Shanker elaborated that the ongoing inclusion in global indices will likely lead to continued flows into Indian government bonds, keeping them range-bound but with a slight downward bias. He reiterated that rates are not expected to fall rapidly. His advice for retail investors is to invest in yield-to-maturity funds and products with a sweet spot of three to five years, alongside corporate bonds and G-Secs, prioritizing higher-rated instruments.

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For retail investors, you should buy yield-to-maturity funds, yield-to-maturity products. I think three to five years is the sweet spot. You can add corporate bonds, you can add G-Secs and just stay at the better end of the curve in terms of rating.