Over the last few months, mutual funds have increased allocation to short-term debt instruments such as Certificate of Deposits (CD) and other short term papers. Why? Fund managers believe that short-term rates could inch up going ahead. Lakshmi Iyer of Kotak Mahindra AMC says that all short-term rates have been going up in response to RBI measures. An introduction of standing deposit facility (SDF) by RBI in April has led to rise in their rates. We expect further increase in short-end rates in response to the sudden rate hike decision by RBI.