Kotak MF: RBI’s OMO to give respite to bond market, rupee: Lakshmi Iyer, Kotak MF

Anything which aids liquidity in terms of execution is definitely a very welcome move at this juncture, Lakshmi

Iyer, CIO-Fixed Income & Head-Products, Kotak MF, tells ET Now.

Edited excerpts:

Is the bond market going to give a thumbs up to 12,000-crore worth of OMOs announced by RBI?

This Rs 12,000 crore is part of the Rs 36,000-crore OMOs that were scheduled by RBI and this was supposed to come in the second, third and fourth week of October. Obviously the announcement was anticipated and to that extent, markets will probably get some bit of psychological comfort. Anything which aids liquidity in terms of execution is definitely a very welcome move at this juncture.

Do you also see a reaction in the currency market as well?

There are a confluence of factors and it is very difficult to say whether the hen came first or the egg came first but it is clearly evident that when bond yields are falling off, the currency comes under pressure and vice versa happening, specifically with the foreign portfolio investors being on a selling spree and even the domestic investors not getting out with their shopping bags as yet.

The dollar-rupee also should get a small respite given the fact that we have seen some small traces of intervention at multiple levels and the incremental overvaluation of the rupee is receding. So, there could be a small positive sentimental pullback on the rupee as well today. The key to watch is whether it will be short lived or will be sustained. I am not very sure as yet.

Do you see other state banks following SBI and help improve the credit profile of the NBFCs?

With the SBI announcing that it will increase its portfolio purchase of loans from non-banking finance companies (NBFCs) this year, the expectation is some sort of sanity should prevail because there was no noise and less news at the current juncture. If this continues with a couple of other banks, it will be a buyer’s market.

It is time for banks to come forth and prop up their asset books and there are good quality assets available in the market. This definitely will bring a lot of solace to the ailing credit scenario right now in the markets.

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