Mr. Shriram R.

Chief Investment Officer - Fixed Income, HSBC Mutual Fund.

Mr. Shriram R.,CIO - Fixed Income, overseeing the management of about INR40,000cr (~USD 8bn), in assets across various Fixed income and Hybrid funds (INR only). He has been in the Asset Management business since 2001 and has over 22 years of experience in fixed income markets. Prior to joining HSBC Asset Management, he was Head of Fixed Income at L&T Investment Management Limited (2012-2022). From 2010-2012, he was Portfolio Manager at Fidelity (FIL) Fund Management managing their India domiciled INR FI funds. From 2005-2009, Shriram was based in Hong Kong at ING Investment Management Asia Pacific, where he managed multi currency portfolios as Senior portfolio Manager, Global EMD (Asia) - co-managing the Asian portion of Emerging Market Debt funds, with focus on sovereign HC and LC rates/ FX, as well as pure Asia local currency funds / mandates. His earlier assignments were with ING Investment Management India as Fixed Income Fund Manager, Zurich Asset Management Company in fixed income research and with the Treasury department of ICICI Ltd, where he started his career in investments in 2000. Shriram is a Chartered Financial Analyst and holds a Post Graduate Diploma in Business Management from XLRI Jamshedpur and an Engineering degree from the University of Mumbai.

Please note we have published the answers as it is received from the Fund Manager of Edelweiss Mutual Fund.

Q1. Debt is considered an important component of asset allocation. From a long-term portfolio perspective, how should investors think about the role of debt funds in balancing risk and stability within their overall investment strategy?

Ans:1 Debt funds play an important role in any investor's portfolio asset allocation. They tend to be relatively less volatile and may have the ability to generate potential returns depending on debt funds have acted as an alternate for the traditional FDs. volatility. Depending on the investor's risk taking ability, need for liquidity and investment time horizon, volatility range of debt funds of

varying risk - return profile from which to choose from.

Q2. Global interest-rate movements, particularly those of the US Federal Reserve, often influence capital flows and bond yields across emerging markets. How do you assess the potential impact of global monetary policy developments on the Indian fixed-income market?

Ans:2 Global monetary policy-especially the Fed-affects Indian fixed income mainly through US Treasury yields and global risk premia, which influence the level and shape of the G-sec and swap curves, and through capital flows into EM debt. Hence, a more hawkish global backdrop tends to tighten financial conditions via higher term premia, weaker risk appetite and a firmer USD. This eventually can increase INR hedging costs and also add to FX volatility. For rates market, it can push yields higher. The recent geopolitical developments have trickled down to rates - FX and interest rate channels - as the concerns around energy-led inflation pressures could imply delayed or no rate cuts by the US Fed, which was not the case until before the West Asia war.

Having said that, the surge in yields in EM's incl. India has been far lower than that observed in the AE's - as EM's fiscal, debt and inflation indicators are better placed than many AE's. Hence, even as the nominal interest rate differentials are lower, narrower than the past, the real differentials are still better. Therefore, even as the global policy tightens, esp. of the US Fed, the implications on Indian debt markets is likely to be contained; benefiting from strong macro fundamentals such as that of near-target inflation, continued fiscal consolidation and decent growth momentum. The duration of the Middle East crisis could turn out to be a spanner in the wheel as uncertainty leads to higher risk premia, globally. As a net energy importer, we could see spillover effects through the FX channel which could then permeate into external, inflation and fiscal risks. At this juncture, inflation and fiscal risks are still contained with external sector far more exposed.

Q3. India's corporate bond market has been gradually evolving, with increasing participation from institutional investors and improving regulatory frameworks. How do you see the development of the corporate bond market shaping opportunities for debt mutual funds over the long term?

Ans:3 Corporate Bond market has been gradually evolving over the years. Various reforms by SEBI, CCIL and RBI which include online Government securities and bond platforms, RFQ trading, and tri-party repos, have boosted liquidity. Corporate issuances hit record highs in FY25, fueled by RBI rate cuts and infrastructure needs, with projections to exceed ₹100-120 trillion by 2030. Outstanding bonds grew at a 12% CAGR over the past decade, rivaling bank credit mobilization. With the continued awareness of the bond market and proper categorization of the debt funds (as per the investment horizon of an investor), debt funds have acted as an alternate for the traditional products. With more participation from the institutional and retail investor, bond market has become more liquid thus reducing the liquidity risk.

Q4. In a credit market where external ratings may lag real developments, what does your in-house credit evaluation framework look like - and how do you assess a company's true debt-servicing ability?

Ans:4 We have our own internal rating framework/scale and limits for long- term (AAA to BBB) and short-term instruments (ST1 highest to ST5 lowest), driven primarily by standalone credit strength. The assessment centers on long-term debt-servicing capacity, factoring in business cyclicality (where relevant) and foreseeable events that may drive material cash outflows/inflows (e.g., M&A, capex). Our structured rating review covers business and financial fundamentals, forecasts and stress tests, promoter track record, mutual fund exposure, rating sensitivities, rating history, and discussions with management and rating agencies-supported by internal governance and sanctions screening.

Following unexpected negative events, the first priority is to evaluate liquidity, funding buffers, and financial flexibility available with the issuer to absorb short-term stress before making internal rating changes. Where risks are severe and persistent, the rating is immediately moved to sell or are placed on hold and incremental investments are paused until the hold is lifted. When warranted, internal ratings are upgraded or downgraded promptly, without waiting for external rating actions, to provide timely investment guidance to the trading desk. Ongoing monitoring is maintained through quarterly results, early warning indicators, external rating updates, and other material developments.

Q5. Given the wide range of debt fund categories available today, how should investors align their investment horizon and risk tolerance with the appropriate type of debt fund?

Ans:5 Investors should align their investment horizon according to their risk-taking ability and also the duration of the investment. For all the debt funds, risk matrix has been defined by SEBI which considers credit risk and interest rate risk. Risk averse investors should look for debt funds which invest in high rated securities and also lower maturity thus less sensitivity for interest rate risk. Given that we are close to the bottom of interest rate cycle, we believe it would be better for investors to keep duration risks low for the next 6-12 months.

Q6. SEBI has recently introduced sectoral debt funds. How do you interpret the role of this category within a fixed income portfolio, and what type of investors should ideally consider such strategies?

Ans:6 Sectoral debt funds (as a SEBI category) are best seen as a 'satellite' allocation within fixed income-not a core holding. They concentrate credit exposure in sector 1-2 (e.g., Financial Services, Energy, Infrastructure, Housing, Real Estate), so the portfolio's outcome is driven less by broad rate moves and more by sector-specific credit cycles, regulation, liquidity, and refinancing conditions. Investors who are having a basic understanding of the sector's business model, can tolerate sector concentration risk, and are using it as a satellite allocation through such concentrated products.

Source: Bloomberg, HSBC Mutual Fund, Latest available data as on 18 March 2026 unless otherwise mentioned

Past performance may or may not be sustained in future and is not a guarantee of any future returns.

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