Quote on Pre RBI Policy by Pankaj Pathak, Quantum Mutual Fund
Below is quote on Pre RBI Policy by Pankaj Pathak - Fund Manager - Fixed Income, Quantum Mutual Fund
Pre Policy Expectations :
The RBI is expected to maintain the status quo on policy rates and keep the accommodative stance. However, it may change the forward guidance somewhat to prepare for a reverse repo rate hike by December policy.
Given the core liquidity surplus is persisting close to Rs. 12 trillion, the RBI may provide a roadmap on liquidity management. However, we do not expect any immediate durable liquidity absorption measure at this juncture as it could raise speculative market actions. The RBI may restrict further liquidity infusion and rely on liquidity neutral instruments to intervene in the bond and forex markets.
From a bond markets perspective, guidance on liquidity will be the key driver for the short tenor bonds, while the longer maturity bonds will depend on the quantum of GSAP (RBI’s bond-buying) in the second half of the fiscal. Given the government borrowing is lower in October 2021 to March 2022 period; we should expect some reduction in the GSAP program in Q3 FY22.
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