RBI keeps repo rate steady: Experts reveal where debt investors should put their money now

The Reserve Bank of India's decision to keep the repo rate unchanged at 5.25% while retaining its neutral policy stance has reinforced the investment case for high-quality debt instruments, according to separate post-policy reports by Edelweiss Mutual Fund and Axis Mutual Fund.

While both fund houses believe the current policy environment is supportive for fixed-income investors, they recommend focusing on different segments of the debt market based on risk-reward opportunities.

The RBI's decision to leave rates unchanged reflects confidence in the resilience of the domestic economy even as it remains watchful of inflation and external uncertainties. Both reports note that core inflation remains contained despite higher food and fuel prices, giving the central bank room to remain patient.

Edelweiss favours high-quality accrual strategies

Edelweiss Mutual Fund described the policy as a "dovish hold," saying the RBI's communication was more reassuring for bond markets than expected.

According to the fund house, lower inflation expectations, stronger growth prospects and comfortable liquidity conditions reduce the likelihood of an immediate policy rate hike. It believes the environment remains favourable for fixed-income investors focused on high-quality accrual strategies.

MUST READ: FCNR (B) cushion lifts rupee hopes; RBI sees more forex inflows ahead

Edelweiss recommends investing in AAA-rated bonds maturing in the 2-3 year segment, along with actively managed bond funds that maintain a weighted average maturity of up to three years. It believes this part of the curve offers an attractive balance between yield and interest-rate risk.

Axis prefers 3-5 year corporate bonds

Axis Mutual Fund also believes the RBI's decision supports debt markets, citing improving growth prospects, contained core inflation, comfortable liquidity and stronger external buffers.

The fund house has an overweight stance on 3-5 year corporate bonds and select State Development Loans (SDLs), saying this segment offers favourable carry, ample liquidity and an attractive risk-reward balance.

At the same time, Axis remains neutral on government securities and cautious on long-duration SDLs, citing concerns over elevated state borrowing, supply pressures and limited scope for yield compression.

ALSO READ: RBI targets rollout of polymer ₹10, ₹20 notes at start of April 2027; check details

Stay with quality debt

Despite differences in maturity preferences, both reports converge on one key theme—prioritise high-quality fixed-income assets over aggressive duration bets.

Axis expects the 10-year government bond yield to trade in the 6.75%-7.10% range during the second half of 2026, while noting that crude oil remains the most important external variable for India's economy. Sustained increases in oil prices could affect inflation, fiscal balances, the current account and currency stability.

Similarly, Edelweiss cautioned that global uncertainties, including geopolitical developments, crude oil prices, El Niño-related food risks, elevated global bond yields and currency volatility, continue to pose risks to the outlook.

Taken together, the two reports suggest that the RBI's policy pause has created a supportive backdrop for debt investors, with the emphasis firmly on quality corporate debt. While Edelweiss prefers the 2-3 year accrual segment, Axis sees greater opportunity in 3-5 year corporate bonds and select SDLs, with both advising investors to remain selective as external risks continue to evolve.

MUST SEE: Will Tata Sons have to list under new NBFC framework? There may be some hints from RBI Governor