Steps taken by RBI, dip in crude oil prices aid the momentum
The host of measures announced by the Reserve Bank of India (RBI) to augment the supply of greenback and a dip in crude oil prices had the desired effect on the rupee, albeit to a limited extent. Government Securities (G-Sec) yields rose, with the yield of the benchmark 10-year paper jumping 6 basis points (bps), tracking rising US Treasury yields as the minutes of FOMC meeting gave indication of the Fed raising the Fed Funds Rate by up to 75 bps at its next meeting.
The Indian unit (INR) closed at 79.1750 per dollar (USD), up about 13 paise compared to the previous close of 79.30.
Forex market experts said if some of the measures announced by the RBI on Wednesday had been taken a couple of months earlier, they could have proved more effective in curbing volatility in the domestic currency. A forex dealer noted that these measures are already in place for banks operating in the GIFT City.
Kotak Securities Ltd (KSL), in a report, noted that
the RBI’s measures to attract forex flows through banks, corporates and debt investors signal a stronger intent in addressing the current dollar shortage. “The forex reserves remain at a healthy level and incremental flows from the measures aim at bolstering it further. While we are cautious on the quantum of incremental flows, we see these measures as being preemptive in capping any sharp depreciation bias and reducing volatility in the INR,” said the report.
Bond yields, market up
Yield of the 10-year benchmark G-Sec (coupon rate: 6.54 per cent) was up 6 bps and ended at 7.3543 per cent (previous close: 7.2952 per cent). Price of this paper was down about 39 paise and ended at ₹94.49 (₹94.875). Meanwhile, the bellwether BSE Sensex closed 0.8 per cent up (or 427.49 points) at 54,178.46, with six stocks — Titan, Tata Steel, L&T, IndusInd Bank, M&M and ICICI Bank — closing up more than 2 per cent.
Nifty opened gap up and sustained its momentum throughout the session to close near the day’s high with gains of 0.9 per cent (143 points) at 16,133.
Siddhartha Khemka, Head-Retail Research, Motilal Oswal Financial Services Ltd., said: “Indian markets remained strong for the second consecutive day on the back of positive global cues, Brent crude falling to below $100/bbl and slower intensity of FII selling.”
Published on July 07, 2022