The better-than-expected first quarter GDP numbers had a positive rub-off on the Rs 15,000-crore auction of government securities on Friday.
The auction of four papers — 8.19 per cent G-Sec maturing in 2020, 8.33 per cent G-Sec (2026), 8.28 per cent G-Sec (2032) and 8.83 per cent G-Sec (2041) — sailed through smoothly with all of them getting subscribed by more than two times.
In the Union Budget, the Government pegged the net borrowing programme at Rs 4.79 lakh crore for 2012-13. In the first six months of the current fiscal, the Government will be mopping up Rs 3.70 lakh crore through auction of G-Secs.
The fiscal deficit in 2012-13 has been projected at 5.1 per cent of GDP, against 5.9 per cent in 2011-12.
According to Dwijendra Srivastava, Head – Fixed Income, Sundaram Mutual Fund, “The bidding at the auction happened after the GDP numbers were announced. The higher-than-expected GDP numbers created a positive sentiment, leading to the auction getting oversubscribed.”
The first quarter GDP number came in at 5.5 per cent, against 5.3 per cent in the preceding quarter. Srivastava observed that banks currently have little choice but to invest in G-Secs in the face of muted credit growth and rising deposit growth. Yields on G-Secs are expected to be stable.
N. S. Venkatesh, Chief General Manager and Head Treasury, IDBI Bank, said the GDP numbers helped the bond auction get oversubscribed as the market expectation for GDP was lower than the numbers released today.
“Due to lacklustre credit demand, investors are willing to buy G-Secs at 8.25 per cent yield. Hence, the bond markets are likely to do well,” he said.
HDFC Securities, in a report, said driven by slowdown in investment and now even consumption, India is likely to see soft GDP growth in the next few quarters.
“Given the apparent consumption slowdown on top of an investment slowdown, the case for lower interest rates looks all the more likely. We maintain our view that interest rates are likely to come down by 100 basis points over the next 12 months,” said the report.