Stake-holders are unanimous on "no change" on policy rates but uncertain on SLR/CRR! There is fear of cut in SLR (and HTM) and hike in CRR as inflation management strategy to retain tight liquidity and elevated money market rates and bond yields.
10Y bond yield has priced-in this fear with marginal spike from below 8.45% to 8.50%. Equity markets at risk of money chasing elevated rates (and yields) in Gilts/Corporate bonds. Rupee retain its support from interest rate play (through higher premium) restricting forward dollar demand upto 1-3 months but pulling in 3-12M exporter's supply on spot weakness into 61.45-61.70.
Post - policy price stability!
RBI may not like to spoil the "NaMo-US" party with "unpleasant surprises" (and when the FM is not in good physical shape); so choice is between delivering to expectation or pull-in surprises, with no HTM cut and no CRR hike! RBI will remind the tracker zone of 6-8% on CPI and 5-7% on GDP for rate/liquidity guidance. At this stage, there is comfort on GDP trend into 7% but lack of optimism on CPI trend into 6%; the need for RBI is to be more watchful on the inflation!
All taken, pre & post-policy range is seen restricted! 10Y bond yield at 8.40/8.45-8.55/8.60%; NIFTY at 7850/7900-8100/8150 and Rupee at 61-62.
Happy holidays!
Moses Harding
No comments:
Post a Comment