The war in West Asia has impacted all countries in varying degrees, with global bond yields rising, pressure on the energy sector and concerns over stagflation amid weak growth and rising inflation, as per a report by Axis Mutual Fund.
Amid this, the fund house, in its ‘Fixed Income Market Review and Outlook April 2026’ report recommended that investors should opt for short- to medium-term funds with tactical allocation of gilt funds.
What strategy does Axis MF recommend for investors?
As per the report, the fund house feels that a barbell strategy is the most effective approach, as it balances short-term bonds for liquidity with long-duration bonds for tactical opportunities. “Our preferred positioning includes 2-year AA-rated corporate bonds for steady accrual and long tenor government securities for duration plays, offering a combination of consistent accrual and potential upside,” it stated.
- Price of crude sustaining above $100/barrel, leading to inflation concerns, and the RBI considering rate hikes: As per the report, a sustained move in crude prices towards the $100 per barrel mark could rekindle inflationary pressures and force the RBI to raise repo rates. “Despite ceasefire announcements for the next two weeks, the duration and trajectory of the conflict remain key risks,” it noted.
- Excessive currency depreciation: “Higher crude prices could translate into imported inflation, currency pressures and tighter financial conditions, underscoring the need for continued vigilance. In this environment, discipline matters more than directional rate calls… The emphasis remains on steady income generation while managing mark-to-market volatility, rather than attempting to time policy or geopolitical outcomes,” it stated.
As per the report, while the conflict has heightened near term volatility, it has not materially altered the medium-term interest rate outlook. It added that markets have already corrected sharply on fears of further rate hikes, and it expects the RBI to keep system liquidity neutral and continue its policy over the next two meetings.
Further it cautioned that, emerging economies, including India, “are relatively better positioned given stronger macro fundamentals, they are not immune”.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
