Rupee, bond markets gain after RBI pause in rate hike

Prices of government securities (G-Secs) were buoyed on Thursday due to the Monetary Policy Committee’s (MPC) status quo on the repo rate.

The rupee appreciated against the dollar due to weakness in the dollar index, inflows from corporates and the RBI announcing plans to permit banks with IFSC Banking Units to offer non-deliverable foreign exchange derivative contracts involving rupee to resident users in the onshore market.

Price of the widely traded 07.26 G-Sec maturing in 2032 rose 42 paise to close at ₹100.31 (previous close: ₹99.89), with its yield declining about 7 basis points to close at 7.21 per cent (7.28 per cent).

“With the pause in repo rate, short end of the yield curve will be largely benefited. However, at the long end, heavy supply will put a lid on bond rally.

“Bond yields are likely to remain range-bound…the trading range for the 10-year paper could shift downward to 7.15 per cent-7.35 per cent for this quarter,” said V Rama Chandra Reddy, Head - Treasury, Karur Vysya Bank.

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Rupee gains 11 paise

The rupee strengthened 11 paise to close at 81.8850 per dollar against previous close of 81.9950.

The Indian unit opened stronger at 81.935 and tested a low of 82.053 as the repo rate remained unchanged, IFA Global Research said in a report. 

Referring to the RBI proposal to allow banks that have a presence in IFSC to allow non-deliverable forex derivates contracts (INR contracts) to resident users in the onshore markets, the report said this will ensure higher volumes and a better opportunity to hedge effectively.