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Bond market sheds worries after RBI policy, rupee steady

The benchmark bond yield dipped eight basis points to 7.52% pushing prices up in afternoon trade.

, ET Bureau|
Feb 07, 2018, 03.09 PM IST
The currency market remained steady with no wild swings.
Bond market shrugged off some of its early worries after the Reserve Bank of India kept the policy rate unchanged without tightening its policy stance from ‘neutral’ now.

The benchmark bond yield dipped eight basis points to 7.52% pushing prices up in the afternoon trade.

“A section of bond market was apprehensive of a change in policy stance to hawkish or even a rate increase,” said Naveen Singh, senior vice-president at ICICI Securities Primary Dealers. “Although the tone is a bit hawkish but we are witnessing a relief rally.”

According to an ET Poll conducted among 25 market participants, respondents were nearly unanimous that the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) might sound hawkish, with the panel's commentary Wednesday likely hinting at a possible increase in rates in its future bi-monthly policy meetings.

“We are yet to figure out what is triggering a strong rally reversing the trend,” said Vijay Sharma, executive vice president for fixed income at PNB Gilts. “Clearly, market was expecting something worse than what it appeared in the policy documents.”

India's retail inflation, as measured by the consumer price index (CPI), accelerated to a 17-month high of 5.2 per cent in December as fuel and vegetable prices hardened, erasing chances of any monetary easing. The gauge was at 4.88 per cent in November.

In the October monetary policy, the RBI raised its inflation projection to 4.2-4.6 per cent for the second half of the current financial year, citing rising global oil prices and an uncertainty over kharif crop output.

The currency market remained steady with no wild swings. At 15:00 hrs the rupee gained a tad to trade at 64.17 a dollar versus 64.25 closed on Tuesday.

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