Bonds are in focus as the Reserve Bank of India’s (RBI) governor Shaktikanta Das said the central bank will intervene if there is a liquidity shortage in the banking system.
Sharing his outlook, Manish Wadhawan, head of fixed income, global markets, HSBC India, said, “Bond yields are reacting to yesterday’s statement by the governor saying that he won’t allow liquidity to be termed as lose money. So there is some kind of a doubt in markets whether the open market operations (OMOs) would continue beyond January end as we see liquidity also getting to a surplus mode in the month of January end and February because of these OMOs being conducted," he said.
“We expect RBI to intervene in terms of buying dollars because they have already used up a kitty of around USD 45-48 billion through their reserves in the last six-nine months. That would be a backstop for rupee. So even if rupee is appreciating because of dollar weakness or other factors, I believe that RBI would be definitely be collecting more dollars to add up to its reserves,” said Wadhawan.