Conducted in early April, this year, the report, based on a survey of portfolio management strategies of fund managers and chief investment officers who manage Rs949bn in assets, however, forecasts that this is set to change with the start of the borrowing programme. "We expect this to trigger yields higher," it says.

In its monthly bulletin Mutual Fund Debt Monthly, it sends out the message "remain focussed on short duration funds".

Highlights of the survey:

• 70 per cent of the fund managers expect the RBI to keep the repo rate unchanged while the remaining expect a hike in the reverse repo rate. No fund manager expects a cut in the rate while no one expressed any uncertainty.
• Bearish sentiments were further emphasised with 85 per cent of the fund managers expecting the market to be bearish in April. The remaining 15 per cent expect the current levels to persist and no fund manager is bullish in the short term.
• However, over a one-year horizon, fund managers seem more optimistic with 23 per cent expecting a bullish market. Bearish sentiments receded substantially to 38 per cent from 67 per cent. However, 38 per cent now expect stability in the markets. This likely highlights the changing sentiment over a one-year horizon.

• In a surprising departure from the increased bearish sentiment expressed by the fund managers, only 31 per cent expect spreads to widen and an equal percentage expect them to narrow.
• The majority, 38 per cent expect them to remain stable.
• In the long term, views were biased towards widening spreads (62 per cent) and remaining stable (38 cent). No fund manager expects spreads to narrow.

• The outlook on returns remained aligned with the bearish sentiments of the fund managers.
• Floating rate funds once again emerged as the most preferred category over a one year horizon followed by long term gilt funds.
• A quarter now placed short-term debt funds in the premier position. No fund manager assigned any preference to income funds or short term gilt funds.

• In the income fund category 62 per cent fund managers now preferred keeping duration stable and about a fourth (23 per cent) wanted to lower duration. The percentage of fund managers wanting to increase duration remained unchanged from last month (8 per cent).
• In line with stability in duration, fund managers wanted to keep bond allocation (46 per cent), gilt allocation (46 per cent) and cash allocation (46 per cent) stable.
• The next choice was to reduce duration and increase cash. Preference for stability showed in gilt funds with 38 per cent wanting to keep duration and 38 per cent gilt allocation stable.

Economy
Views on a strong economy clearly lost flavour, with only 38 per cent (from 83 per cent last month) expecting a stronger economy. The majority (54 per cent) expect the economy to remain stable. While a minor 8 per cent expect a weaker economy (from 0 per cent last month).