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Poornima Mohandas

MUMBAI, March 20

EQUITIES were not alone in the rally following the US attack on Iraq on Thursday. The gilt market also showed signs of bullishness.

Though traded volumes were not sufficient to trumpet about, the sentiment in the market certainly seems to be positive, dealers said.

This follows a month-and-a-half of falling prices and bearishness in the debt markets with players wary of the situation in the West Asian region.

The markets had discounted the war and therefore, prices will not fall any further. "The scenario seems quite benign and players are betting that it will be a short war,'' said the head of a foreign primary dealership.

The enthused treasury head of a nationalised bank said: "Bullishness is back in the market today. Value buying was seen with public sector banks, foreign banks and mutual funds stepping in to buy.''

From the last week of January, the G-secs market has been going through a very dull patch with prices falling to new lows every day and most players entering selling mode.

Several banks and primary dealers have faced heavy losses during this period, which is also likely to affect their profit targets for the year-end.

Now that the war has begun, players are of the opinion that it is a good time to buy and make up for losses experienced during this quarter. "Prices have bottomed out. The time is ripe to buy for both investors and traders alike," said a senior dealer.

Players plan to buy now and wait till the war is over to sell and book profits. The assumption is that a rally is inevitable since the fundamentals demand it.

With the repo rate slashed to five per cent following the Budget, the 10-year benchmark paper has to be below six per cent.

The 9.81 per cent 2013 paper ended the day at 6.44 per cent after a mild rally intra-day.

However, plans could go haywire if the war goes on for more than 10-15 days.

Oil prices could shoot up, triggering inflation and panic. People would then be wary of taking fresh exposures and prices could see a tumble southwards, said a trader in a primary dealership.

Players are also counting on the US to win. On a perverse note, a dealer said, "If the US were to carpet-bomb Iraq tonight, it would be good for the markets,'' indicating that the faster the US wins, the better.

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