The article titled "Where to fish for higher yields" was written by Aarati Krishnan and appears on page 2 of the May 17, 2026, edition of Business Line Portfolio. Here is the full reproduction of the article:
Where to fish for higher yields
With the oil shock beginning to make itself felt, returning inflation looks set to take the shine out of both gold and equities. The recent spike in India's Wholesale Price Index to 8 per cent plus suggests that corporate earnings, after a robust Q4 FY26, can take a breather over the next few months as companies try to pass on pinching input costs to consumers.
Global gold prices tend to be inversely correlated to treasury yields in the US. As US inflation rears its head and developed market bonds see a rise in yields, investors may make a beeline for treasuries instead of gold. However, in investing, whenever opportunities in some asset classes recede, they crop up in others. Today, bonds are turning more attractive for investors, with rising inflation expectations and the renewed possibility of policy rate hikes.
India’s Monetary Policy Committee (MPC) has slashed repo rates by 125 basis points through 2025 and is now sitting on the pause button. But with bond markets responding to the recent oil shock, bond yields in many sections of the market are already ruling at levels that prevailed before these rate cuts. If low-key tensions in West Asia continue, crude oil remains at $85 plus and the looming El Nino disrupts food production, analysts are now betting that inflation can shoot past 5 per cent. Should this happen, the MPC can take its finger off the pause button to restart a rate hike cycle.
BOND YIELDS RISING
Bond markets always run well ahead of policy actions. Therefore, market yields on bonds have already been rising sharply on expectations of the next rate hike cycle. The yield on the 10-year government security (G-Sec), the benchmark for the bond market, bottomed out at 5.9 per cent in May 2025 and has since climbed to 7.1 per cent now. These are levels that prevailed in 2025 before repo rate cuts began.
Yields on other bonds have climbed in tandem too. This throws up blooming opportunities for investors looking to improve the returns on the debt component of their portfolios. On the flip side, though, rising rates hurt bond prices. Therefore, while shooting for higher yields, it is also important to limit the losses on your bond holdings from any further rise in rates.
We analysed the entire gamut of bond options, to come up with three sets of high-yielding opportunities that investors can tap today, to balance risk with reward. Do note that we have looked at bonds more from a wealth-creation perspective than the need to park surplus.
SDLS: SAFETY PLUS YIELD
Historically, the best times to invest in Central G-Secs in India was when the yield on the 10-year G-Sec hovered between 7.5 per cent and 8 per cent. Yields today are well below these at 7.1 per cent. However, State Development Loans or SDLs present a high-yield opportunity.
If you look at historical data, SDLs have usually traded at a 30-40 basis point spread over G-Secs of similar tenure. Since the beginning of 2026, however, SDLs are offering attractive yields because the SDL spread has widened to 70-80 basis points. State governments in India have become more prodigious borrowers than the Centre, leading to the market demanding higher yields from them. Effectively, investors can earn yields as high as 7.6-7.8 per cent by investing in State government bonds, against around 7 per cent from comparable Central G-Secs.
Theoretically, State governments are slightly riskier entities than the Central government, because they are reliant on the Centre for funds. However, SDLs still offer near-sovereign safety because the servicing of these loans is managed by the RBI (Reserve Bank of India) through an escrow mechanism. There is no past case of a State government in India defaulting on, or delaying a SDL payout. SDLs are also offering higher yields than many PSU and AAA-rated private sector bonds, presenting a sound investment opportunity.
A caveat here: SDLs are a very different instrument from bonds floated by State government entities such as State-promoted power corporations, transport corporations, and infrastructure development corporations which offer yields of 9-10 per cent. These bonds are risky bets — not explicitly guaranteed by States and known to suffer from delayed payments in the past.
What to buy: Retail investors looking to buy individual SDLs can open an account with the RBI Retail Direct platform. This allows retail investors to invest sums starting from ₹10,000 in Central G-Secs and SDLs. Weekly auction calendars are emailed to you in advance. You need to wait for the SDL of the desired tenure to be auctioned, so you can participate. The latest SDL auction on May 8, for instance, offered bonds with maturity dates ranging from 2032 to 2056 and yields ranging from 7.5 per cent to 7.9 per cent. Do note that SDLs bought in auctions need to be held to maturity, as they carry limited secondary market liquidity.
If you want to participate in the SDL opportunity without liquidity issues, debt funds investing in indices made up of SDLs offer a good alternative. Mutual fund houses manage a large menu of SDL-only funds, SDL plus G-Sec funds, and SDL plus PSU bond funds that mature on specific target dates. Today, if looking to park two-year money, Kotak SDL plus AAA PSU Bond July 2028 Index Fund offers a 7.05 per cent yield to maturity (YTM). For five- to six-year tenures, Kotak SDL April 2032 Top 12 Index Fund and ABSL Crisil June 2032 Fund are the highest yield options with YTMs of 7.6 per cent and 7.5 per cent respectively.
FRBS: CAPITALISE ON THE RISE
Usually, debt investors shy away from floating rate bonds because of variable returns. But when the economic outlook tells you that rates can only flat-line or go up, floating rate bonds make plenty of sense. There are three ways for Indian investors to participate in floating rate bonds: floating rate debt mutual funds, government bonds pegged to floating rates, or the retail GOI floating rate savings bonds. Of the three, the last is the most viable option.
What to buy: The Government of India’s Floating Rate Savings Bonds (FRSBs) meant for retail investors are the only practical option for investors looking to ride the rate cycle through floating rates. These bonds pay their interest rate at a 35-basis point spread over the prevailing interest rate on the NSC. The current floating rate on FRSBs is 8.05 per cent per annum. These bonds can be bought from banks or the RBI’s Retail Direct. However, they have a seven-year lock-in period and carry no cumulative option for interest.
CORPORATE BONDS
Apart from SDLs, corporate bonds have also seen their spreads over G-Secs widen sharply in the past year. While yields on short-term corporate bonds (one-year maturity) are still well below 2025 levels, yields on bonds with three-year-plus maturity are back to levels that prevailed before the rate cuts started. Currently, AAA-rated corporate bonds offer yields of about 7.7-7.8 per cent for three-year tenures. Those rated at AA offer 8 per cent for the same tenure.
What to buy: Investors can earn higher yields from this space in three ways:
- Individual Bonds: You can buy individual AAA- or AA-rated bonds from online bond platforms. It is important to keep off bonds with only an 'A' rating. For instance, the Indiabonds.com platform has a CARE AA-plus rated bond from Cholamandalam Finance maturing in June 2029 at an 8 per cent yield.
- Passive Index Funds: Buy funds that focus on highly-rated NBFC bonds. Options for 2-year money include the Edelweiss CRISIL IBX AAA Financial Services Bond January 2028 Index Fund (7.7 per cent YTM). For five-year money, Bharat Bond ETF 2031 (7.5 per cent YTM) is a good bet.
- Active Corporate Bond Funds: Filter for healthy YTMs and low costs. Franklin India Corporate Bond Fund (7.8 per cent YTM) and ICICI Pru Corporate Bond Fund (7.75 per cent YTM) currently fit the bill.
Three high-yield opportunities (Summary Table)
| Why buy | How to buy |
|---|---|
| State development loans | |
| Trading at 7.6-7.8% yield, 70-80 bps spread over G-secs | SDL auctions in RBI Retail Direct or SDL index funds |
| Floating rate bonds | |
| Will deliver better returns with rising rates. Protect capital in rate rise | GOI's Floating Rate Savings Bonds (Retail) from banks or RBI Retail Direct |
| Highly rated NBFC bonds | |
| Trading at 7.5-9% yield | Online bond platforms or passive debt MFs investing in NBFC bonds |
The article titled "Buying what markets ignore" was written by Dhuraivel Gunasekaran of the BL Research Bureau and is found on page 4 of the Business Line Portfolio edition dated May 17, 2026. Below is the reproduction of the article:
Buying what markets ignore
FUND TRACKER. Contra funds invest in stocks or sectors that are currently out of favour and ignored by the market, betting on a turnaround in sentiment and business performance.
Motilal Oswal Mutual Fund has entered the contra fund category with an NFO in May, adding to a relatively under-populated segment that currently houses only three schemes: SBI Contra, Invesco India Contra and Kotak Contra Fund. The launch comes at a time when the category, though small, has quietly built a track record that merits closer scrutiny. The big question is whether these funds have consistently outperformed broader market indices like the Nifty 500 and how their stock-picking philosophy differs.
Contra funds invest in stocks or sectors that are currently out of favour and ignored by the market, betting on a turnaround in sentiment and business performance. While value funds focus on stocks trading below their intrinsic or fundamental value, contra funds target market popularity. While value and contra styles can overlap if companies' valuations are attractive, contra funds specifically avoid crowded trades and look for opportunities in stocks linked to market inefficiencies.
The category’s limited size could be linked to tighter SEBI classification norms, which required that a house could offer either a value fund or a contra fund but not both. Consequently, AMCs largely gravitated towards the value category, leading to over 40 such schemes across active and passive categories. However, a regulatory shift in February 2026 now permits AMCs to offer both categories, subject to portfolio overlap remaining below 30 per cent.
PERFORMANCE TRACK RECORD
Despite its small universe, the contra category has delivered impressive returns. Over the last 10 years, five-year rolling returns for the category was 19.5 per cent CAGR, outperforming the Nifty 500 TRI (17 per cent). Over a 3-year period, it has delivered a comparable diversified category performance.
Within the segment, SBI Contra fund is the consistent performer, generating 22 per cent on a 10-year basis, followed by Kotak Contra and Invesco India Contra at 18 per cent and 17 per cent, respectively. On a three-year rolling basis too, contra funds maintained an edge, delivering about 19 per cent return against about 15 per cent for the Nifty 500 TRI.
DIVERGENT FRAMEWORKS
Each fund house deploys a distinct framework to identify contrarian opportunities:
- SBI Contra uses a three-bucket approach: turnaround, cyclical and value. Turnaround ideas focus on companies facing short-term operational or financial stress but with identifiable triggers such as management change or restructuring. The cyclical bucket targets stocks nearing the bottom of their cycles, using indicators such as capacity utilization and pricing power. The value segment targets overlooked businesses trading at significant discounts to long-term potential.
- Kotak Contra builds a contrarian universe from its research coverage of over 350 stocks. Eligibility is based on five predefined filters: underperformance versus the Nifty 500 index, trading below long-term average valuations, lower valuation multiples relative to sector peers, sectoral underperformance versus the benchmark, or trading below the 200-day moving average. From this universe, the fund applies its BMV framework (business, management and valuation) to identify fundamentally-strong companies with re-rating potential. The final portfolio usually consists of 50-60 stocks.
- Invesco India Contra is a steer on four categories of opportunities: companies in a turnaround phase, stocks trading below fundamental value, businesses benefiting from cyclical upswings and growth companies available at attractive valuations. It actively takes overweight positions in deadweight sector stocks against the benchmark based on valuations, opportunities and sector rotation. The portfolio is mandated to maintain about 50-60 per cent exposure to value-oriented ideas.
- Motilal Oswal Contra Fund plans to follow a “contra growth” strategy, differentiating itself from existing contra schemes that largely adopt a value-oriented approach. The fund aims to identify opportunities arising from sectoral dislocations, low investor interest, weak analyst coverage and valuation gaps relative to sector averages. The strategy categorises ideas into three portfolios: momentum opportunities, primarily using the PEG (price/earnings-to-growth) framework targeting a portfolio PEG ratio of around 1.2, and focusing on companies with strong profit-growth visibility over the next two-three years. Key quality filters include operating cash flow-to-net worth, strong profit-to-cash-flow conversion and low debt-to-equity ratios. The portfolio will remain concentrated, with 25-30 high-conviction stocks and is unlikely to exceed 35 holdings.
CURRENT OPPORTUNITIES
Across funds, current positioning reflects a mix of cyclical and value themes. SBI Contra has identified oil and gas as a promising opportunity, citing temporary earnings pressure in the OMCs and sectoral developments. It also sees selective turnaround opportunities in pharma, while remaining cautious on IT from a sectoral perspective. Over the last three months, the fund has newly added UPL and significantly increased exposure to E.I.D. Parry (India), ICICI Bank and Prism Johnson.
Kotak Contra remains overweight on financials, citing valuations are below long-term averages even as credit growth and asset-quality trends improve. Pharma remains another preferred segment, particularly domestic manufacturing. Recent additions to the portfolio include Tata Steel, IndusInd Bank and M&M.
Invesco India Contra sees short-term contrarian opportunities in auto, tyres and chemicals, where profitability has been temporarily impacted by elevated crude oil prices. The fund expects earnings recovery across these sectors as input prices normalise over the coming quarters. Medium-term opportunities are being identified in PSUs. Within financials, the fund expects credit costs to remain stable, and provisioning under the RBI’s expected credit loss (ECL) norms to favor large-cap players. For long-term contrarian opportunities, the fund manager identified IT as a key area.
INVESTMENT TAKEAWAYS
Contra investing is inherently risky, because these well-founded ideas may remain out of favour for extended periods, leading to interim underperformance and testing investor patience. Another major risk is “value traps”, where beaten-down stocks fail to recover due to structural issues. Further, contra funds can lag during momentum-driven bull markets.
Therefore, including a contra fund in a portfolio necessarily represents a satellite strategy, not a core strategy. By targeting out-of-favour stocks, the contrarian approach takes time to deliver. Contra funds suit patient, risk-tolerant investors with an investment horizon of more than five years.
MIND IT
- Contra investing is inherently risky and timing-sensitive.
- Some beaten-down stocks may remain weak due to structural issues.
- Contra funds can lag during momentum-driven bull markets.
The article titled "On the road to recovery" was written by Sai Prabhakar Yadlapalli of the BL Research Bureau and is found on page 5 of the Business Line Portfolio edition dated May 17, 2026. Below is the reproduction of the article:
On the road to recovery
CHEMICALS. SRF has navigated recent challenges well, as reflected in its latest Q4FY26 results
SRF reported its Q4FY26 results in early May and provided a strong outlook. We had recommended a hold on the stock in January 2025 as valuations were elevated at 44 times one-year forward earnings even when factoring for expectations of strong growth. Since that call, the stock has declined 4 per cent, even though the company has delivered a respectable full-year revenue growth to ₹15,787 crore (up 6.5 per cent) and net profit growth to ₹1,835 crore (up 4.1 per cent) in FY26. The stock now trades at 36 times one-year forward earnings, broadly in line with historical averages, and we recommend that investors accumulate the stock on its strong projections linked to the US-Iran situation.
Two of SRF’s three large segments—technical textiles and performance films—are expected to recover over the next few quarters, having navigated recent challenges well, including margin volatility. However, volatility in energy prices and global demand remains an overhang for both the company and the broader economy.
As seen in the segment chart, the largest segment of chemicals delivered strong revenue and EBIT growth in FY26. Technical textiles and performance films segment reported better performance, with a revival in margins aided by strong performance in FY26. Management expected to see similar trends in the next fiscal too.
CHEMICALS BUSINESS
The division includes specialty chemicals and refrigerant gas segments. Management expects demand to drive 15-20 per cent revenue growth in FY27 for the Chemicals segment, which makes up more than 50 per cent of EBIT by the RG [ref-gas] sub-segment. This is on the base of a 16 per cent revenue growth in FY26.
The year gone by witnessed strong volume and price growth for RG. Internationally, RG sales are now under a quota regime to limit the impact of greenhouse gases. This appears to have benefited existing companies in the business with elevated volumes and better price realization. The company should gain further, as it debottlenecks its capacity at Dahej, Gujarat and continues to be supported by improved prices. It expects to add 10-15 per cent volume by debottlenecking for a total volume of 45,000 tonnes per annum in capacity.
SRF is building a facility for RG, developed from in-house research, which is a fourth-generation RG and is likely to be environmentally sustainable. The plant is expected to be commissioned by February 2028. The project includes annual RG capacity of 20,000 tonnes and a 30,000-tonne hydrofluoric acid (a raw material) facility to support production, while also offering potential to explore electronic-grade sales.
The company has entered into a long-term supply contract with Chemours (the US-based chemicals major that was spun off from Dupont) for the manufacture, supply and distribution of fourth-generation HFO-1234yf fluoro-olefins. The multi-year arrangement caters to global markets across diverse industries such as semiconductor, automotive, aerospace, chemical processing, and oil and gas. The company has planned capital outlay of ₹745 crore for the project that will be completed by December 2026 and should contribute to revenues towards Q4FY27.
It has also started trial production of higher grades of fluorinated polymers—PTFE—which should also contribute to sales this fiscal.
On the other hand, the specialty chemicals sub-segment under the Chemicals segment has been facing lower volume in demand and pricing pressure on account of Chinese competition in the last two-three years. This is similar to performance seen in agricultural and technical textiles division as well.
To counter the same, SRF has developed a pipeline of advanced intermediates and agro chemicals division, which are under client evaluation. It will unleash new launches even as the old portfolio is expected to face increasing competition. The recent quarter indicates an easing in inventory levels, and specialty chemicals cycle may be improving, but the timing of recovery is yet unknown. SRF is also building two new multi-purpose plants at Indore, under which seven new agro-chemical products are under sales, and the company aims to develop a larger, more advanced portfolio, supporting sales in the sector.
It expects a capital expenditure of ₹2,000 crore in FY27, which includes facilities supporting chemicals division. SRF has explored land in Dahej where a greenfield plant will be developed, supporting its pharma intermediates and agro chemicals business. In specialty chemicals, fourth-generation fluorinated polymers (PTFE) and PTFE advanced grade launches, SRF expects to drive 15-20 per cent revenue growth for chemicals in FY27.
PF DIVISION
In recent, performance films and technical textiles divisions are showing a turnaround in margins. But the performance films (manufactures packaging films) division is showing improved margins, as pricing pressure eases. The division reported 220-bp improved EBIT margins in FY26, which is likely to continue. SRF is conducting trial runs for a higher-grade performance film plant and adding a new production line for a higher-grade film in FY27. This should further support margin recovery and support sales from pressure cases.
The company has a comfortable net debt to EBITDA of 1.29 as of March 2026, which supports the strong capital expansion plans of ₹2,000 crore taken for FY27. SRF has reported only a minor impact from the US-Iran-Israel conflict; disruption in RG sales to the US was observed, as the US has redirected through other countries. However, despite energy volatility, raw material volatility and other potential disruption, we recommend investors accumulate the stock on its strong eye on longer term recovery.
Box: ACCUMULATE - SRF
- CMP: ₹2,581.65
- SRF Ltd Target: ₹2,688.65
- WHY:
- Valuations have normalised
- Strong capital expansion plans
- Margin recovery underway
The article titled "Flipkart tops e-commerce user growth: CLSA" is found on page 12 of the Business Line edition dated May 17, 2026. Here is the full reproduction of the article:
Flipkart tops e-commerce user growth: CLSA
Our Bureau New Delhi
Flipkart is pulling ahead of rivals in India's e-commerce market, adding significantly more users than Amazon and Meesho in the past year, according to a report by brokerage CLSA.
The Walmart-owned e-commerce platform added 8.5 million weekly active users (WAUs) for the week ended May 4, compared with 6.6 million additions for Amazon, while Meesho lost 3.9 million during the same period, CLSA said in its latest India consumer sector outlook.
Year-to-date, Flipkart added 26.8 million WAUs, while all its peers together added 10.6 million, the brokerage noted.
CLSA’s analysis, based on Sensor Tower data, said Flipkart now leads across key e-commerce metrics, including WAUs and user engagement levels.
The article titled "Bears take to control" was written by Akhil Nallamuthu of the BL Research Bureau and appears on page 6 of the Business Line Portfolio edition dated May 17, 2026. Below is the reproduction of the article:
Bears take to control
BULLION CUES. Traders can go for fresh shorts
Prices of precious metals dropped last week. Spot gold ($2,327.3/oz) and spot silver ($28.3/oz) were down 3.7 per cent and 5.4 per cent, respectively.
However, in the domestic market, the decline was relatively lower due to the rise in import customs duty. Gold futures (₹71,130/10 grams) and silver futures (₹83,720/kg) fell 1.6 per cent and 2.7 per cent. Below is our analysis:
MCX-GOLD (₹71,130)
Last week, the gold futures hit a resistance at ₹73,500 and marked a two-month high of ₹73,853. Since then, the price moderated to end at ₹71,130 on Friday.
The breakout is unlikely to sustain as long as bears hold the gold in the global market. We expect MCX gold to drop further to ₹68,500. A break below ₹70,800 can lead to a fall to ₹68,500.
Trade strategy: Short gold futures (June) at ₹71,130. Place stop-loss at ₹73,500. When the price drops to ₹69,500, revise the stop-loss to ₹71,530. Book profits at ₹68,500.
MCX-SILVER (₹83,720)
Silver futures (July) broke out of the resistance at ₹85,500 early last week. It touched a two-month high of ₹88,409 on Wednesday, before seeing a correction in the subsequent sessions.
The breakout in silver futures, unlike gold, looks real. From the current level, we expect it to fall to ₹80,000 to find support. The next support is at ₹74,000.
Trade strategy: Short silver futures (July) at ₹83,720 and on rallies to ₹85,000. Place stop-loss at ₹88,000. When the contract falls to ₹81,500, move the stop-loss to ₹84,000. Book profits at ₹80,000.
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