The Imperative of Strategic Treasury Management

At IMA India’s recently held Annual CFO Strategy Roundtable, Sandeep Yadav, Head Fixed Income, DSP Mutual Fund, emphasised the urgent need for a forward-looking approach to treasury management. He highlighted the intricacies of managing treasury portfolios amid market volatility and policy shifts, particularly in the context of recent corrections in global markets. Notably, the US Federal Reserve’s 50-basis point rate cut — a response to mounting unemployment and erratic market behaviour — marks what many expect to be the peak of the current rate cycle, with anticipated knock-on effects for monetary policy worldwide, including India’s RBI.

Yadav pointed to the rising relevance of fixed-income securities as interest rates stabilise, making them increasingly attractive to investors in uncertain times. Meanwhile, treasury management has evolved beyond traditional risk mitigation, expanding to encompass liquidity assurance and return optimisation through the use of data-driven tools and AI-powered forecasting. Yadav identified two critical shifts reshaping this landscape: the global economic instability caused by supply-chain disruptions and capital flow restrictions, and the rapid integration of AI in decision-making processes.

Clearing misconceptions around investment vehicles, he explained that mutual funds, contrary to common belief, now rival or even surpass fixed deposits in liquidity, with active funds outperforming in this dynamic environment. Furthermore, India’s bond market, once sensitive to inflation metrics, now responds more significantly to RBI policy rates and bond purchases. In this transformed setting, strategic treasury management — combining adaptive investment strategies and advanced analytical tools — is paramount for optimising returns amidst economic flux.

This session took place on Day 2 of the IMA India’s Annual CFO Strategy Roundtable, held in Ashtamudi from 19th to 21st September 2024.