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Union Budget FY2025 - Fixed Income Perspective

A budget committed to push growth while focusing on fiscal consolidation
02 August 2024
    Local Market Commentary
    Download the full reportPDF, 377.83KB

    Key Takeaways of the Union Budget

    • Government will continue its focus on fiscal consolidation without compromising on growth
    • Fiscal Deficit numbers for FY2024 and FY2025 were below market consensus, adding credibility to reaching a target of 4.5 per cent by FY2026
    • While markets were expecting a larger reduction in net borrowing at a Fiscal Deficit number of 4.9 per cent; however net borrowing was only lower by INR 120bn
    • Yields of Government securities moved higher by 1-2 bps post the announcement, however markets recovered as the day progressed
    • Corporate bonds also moved broadly in line with Government securities
    • We continue to maintain our positive duration bias on interest rates

    We believe there can be a favourable case to add duration to investor portfolios with a 1.5 - 2 year investment horizon

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