Remain invested in low duration funds!!

 RBI governor's tone was rather hawkish; the priority being to rein in headline inflation  at the cost of lower growth going forward, as opposed to the earlier stance of supporting growth while containing inflationary pressures. The bond prices will probably remain range-bound with a declining bias in the near-term as market participants may await a revision in the fuel prices and its impact on headline inflation. The yield curve will flatten more in the near-term as the 50 basis-point hike will gradually push short-term rates higher. 3M bank CD yields will gradually trend towards 9.50-9.75% pa from their current levels of 9% pa. 12M bank CD yields may touch 10% pa in the near-term. Banks will probably raise both deposit rates as well as lending rates in a gradual manner. It is advised to remain invested in low duration funds at the moment and wait for money market rates to peak out in the next three to six months before seeking to extend the duration of investments.