Bandhan Dynamic Bond Fund Regular Plan Payout of Income Dis cum Cptl Wdrl Opt INF194K01QO8

Interest-rate direction is determined by conducting a detailed analysis of influencing factors such as growth versus inflation, fiscal and current account deficit, private sector and government borrowings, fiscal and monetary policy view, money supply, currency market movement, and global interest-rate scenario, among others. This is complemented by an overlay of technical factors where the team examines the supply-demand dynamics to get clarity on valuations and the direction of the yield curve. Interest-rate direction calls and anticipation of yield curve movement form the basis of portfolio positioning in terms of duration.

For corporate bonds, the team emphasizes the promoter group, its track record, and its corporate governance standards. Suyash Choudhary will not lend to a company facing corporate governance issues. Additionally, he looks at companies' competitive standing vis-à-vis peers, practices, cash flows, liquidity profile, business, and financial risks, among others. The investment team takes a relatively long-term view and does not pay much heed to news flows. The view once formed is applied across fixed-income funds.

Safety and liquidity form the crux of portfolio construction. Taking credit bets is not a part of the strategy; this has enabled the fund to tide over credit risk more comfortably than some peers. Suyash Choudhary is at his best when he has a free hand, and pleasingly, the fund’s strategy allows him to play to his strengths. He invests across the yield curve and segments: government securities, corporate bonds, and money market instruments. The team studies bond spreads and liquidity of various segments to determine their optimal allocations in the portfolio.

He doesn’t shy away from significant exposure to a single segment or security if his views on valuations and interest rates suggest so. This is evident from his current portfolio; he holds 84.75% of assets in one government bond. While Choudhary has the skills to run such a concentrated approach, this still adds an element of risk to the investment approach.

Choudhary dynamically manages the fund’s duration depending on his macro views. He maintained a higher average maturity than his peers in 2019 and 2020, benefiting from a 290-basis-point rate cut by the RBI during that period. In the current scenario, the manager has sharply increased the fund’s modified duration from 2.91 years in December 2022 to 11.49 years in February 2024. This is on the back of the team’s belief that India is in the midst of a macroeconomic rerating. This decision is supported by factors such as a stable current account deficit, favorable inflation trends, government efforts toward fiscal consolidation, increased global demand for Indian government bonds because of their inclusion in the JPMorgan Index, and expectations of a moderate rate cut this year.