Bonds, stocks slide on RBI, SC move – Times of India
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MUMBAI: Friday was a busy day for the bond and stock markets both with decisions by the Supreme Court and the RBI impacting investor sentiment. In the government bond market, after the RBI increased its retail inflation forecast for the year to 5.7% from 5.1%, gilts witnessed a selloff with the benchmark yield in the 10-year paper jumping to 6.26%, a one-and-half-year high, from 6.2% at Thursday’s close.
The central bank also allowed banks to park surplus liquidity under variable rate reverse repo (VRRR), increasing from Rs 2 lakh crore to Rs 4 lakh crore by end-September, was seen as a tentative step to normalisation of the excess liquidity situation in the banking situation. VRRR is a process through which banks can park their extra funds for 14 days or more with the RBI.
According to Kumaresh Ramakrishnan, CIO, fixed income, PGIM India Mutual Fund, the policy was “‘supportive” and the commentary as reasonably dovish. “But the less-than-unanimous vote for an accommodative stance, higher VRRR amounts and raising of inflation forecasts, signal some emerging concerns within the central bank at the margins,” he said.
In late afternoon, the RBI also announced that it had cancelled the Rs 26,000-crore weekly auction of G-Secs under the government’s borrowing programme for the current fiscal. Bond dealers said that the central bank was not comfortable with bond buyers’ demand for higher yield (meaning lower price) for G-Secs and hence the cancellation of the whole auction.
On Dalal Street, RIL, along with banking and financial stocks mostly led the slide. RIL closed 2.1% lower on the back of an adverse SC judgment on its Rs 24,713-crore deal to buy Future group’s retail business. Along with RIL, all the stocks belonging to the Future group witnessed strong sell-off and most closed at the lower circuit.
Led by RIL, the sensex closed 215 points lower at 54,278 points, while on the NSE, the Nifty closed 56 points lower at 16,238. The day’s trading on the Street also witnessed strong buying in Vodafone Idea with the stock closing 20% up at Rs 7.1 on the BSE. The rally came after the Lok Sabha repealed a controversial tax law that had led to several court cases globally.
The central bank also allowed banks to park surplus liquidity under variable rate reverse repo (VRRR), increasing from Rs 2 lakh crore to Rs 4 lakh crore by end-September, was seen as a tentative step to normalisation of the excess liquidity situation in the banking situation. VRRR is a process through which banks can park their extra funds for 14 days or more with the RBI.
According to Kumaresh Ramakrishnan, CIO, fixed income, PGIM India Mutual Fund, the policy was “‘supportive” and the commentary as reasonably dovish. “But the less-than-unanimous vote for an accommodative stance, higher VRRR amounts and raising of inflation forecasts, signal some emerging concerns within the central bank at the margins,” he said.
In late afternoon, the RBI also announced that it had cancelled the Rs 26,000-crore weekly auction of G-Secs under the government’s borrowing programme for the current fiscal. Bond dealers said that the central bank was not comfortable with bond buyers’ demand for higher yield (meaning lower price) for G-Secs and hence the cancellation of the whole auction.
On Dalal Street, RIL, along with banking and financial stocks mostly led the slide. RIL closed 2.1% lower on the back of an adverse SC judgment on its Rs 24,713-crore deal to buy Future group’s retail business. Along with RIL, all the stocks belonging to the Future group witnessed strong sell-off and most closed at the lower circuit.
Led by RIL, the sensex closed 215 points lower at 54,278 points, while on the NSE, the Nifty closed 56 points lower at 16,238. The day’s trading on the Street also witnessed strong buying in Vodafone Idea with the stock closing 20% up at Rs 7.1 on the BSE. The rally came after the Lok Sabha repealed a controversial tax law that had led to several court cases globally.
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