Indian debt funds set to extend $4.5 billion bond selloff after RBI policy shift

Indian mutual funds are set to sell more government bonds after offloading $4.5 billion since ​July, four fund managers said, as the central bank's policy shift raised ‌expectations of a longer, steeper rate-tightening cycle.

The Reserve Bank of ​India raised rates for the first time in nearly ⁠four years and signalled further increases as inflation rises.

Mutual funds have reduced their exposure to longer-dated government bonds as rate expectations have changed, said Mansi Sajeja, a ‌fixed-income fund manager at SBI Mutual Fund.

Asset managers sold a net ₹51 billion ($527.08 million) of government bonds ‌in the three sessions after the rate increase, adding to sales ‌of ⁠₹378 billion in July-September.

"The policy tone sounded more ⁠cautionary on inflation generalisation than growth outlook, giving it a hawkish tilt," Amit Somani, a deputy head of fixed income at Tata Asset Management said.