Ashish Parthasarthy, Head Treasurer, HDFC Bank sees rupee in range of 62-63 to the dollar.
With the inflation number coming in lower, Ashish Parthasarthy, Head Treasurer, HDFC Bank sees a strong probability of a June rate cut. In all two rate cuts by Reserve Bank of India in this financial year.
Retail inflation, as measured by the consumer price index (CPI), slowed to 5.17 percent year-on-year in March, government data released today showed, compared to 5.37 percent in February.
On the rupee front, he says with most markets being range bound, rupee too is likely to be in a broad range of 62-63 to the dollar.
He sees the 10-year bond yields trading in range of 7.70-7.75 percnet.
Below is the transcript of Ashish Parthasarthy's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Latha: Good inflation number you think. How will you play it as an investor?
A: Yes, the inflation number surprised most on the downside, especially on the food front. It is a good number. We will see some amount of reaction in the market in terms of rate being slightly softer. Market is very range bound, you have seen it in a narrow range and it is likely to continue in a range for some more time.
Latha: I guess the ten-year closed at 7.79 percent on April 13. What kind of gains you expect, about 5 bps?
A: Around 5-6 bps; and would be of 7.70-7.75 percent now rather than 7.75 and 7.80 percent.
Latha: What about further opening up of space in terms of rate cuts?
A: Majority opinion and our house view is that we will see two more rate cuts during this financial year. Majority of the market participants feel one to two rate cuts are down the line, but we have to see that in context of how the supply demand position is. I think statutory liquidity ratio (SLR) requirement for the banks may go down, mutual funds also have lot of government holding in their debt funds.
Whenever we see from a market perspective any rally or sharp fall in yields, you will see lot of profit booking at those levels. Therefore, even if there is down move in yields it will get restricted because of some amount of profit booking.
Sonia: What is your view on the rupee now – 62.40/USD as we open this morning. What do you think the trend could be there?
A: All markets are so range bound so rupee is also likely to remain there. We would see favourable balance of payments and hence pressure and appreciation of the rupee but given dollar strength and Reserve Bank of India (RBI) looking to continue to shore up reserves, ppreciation is likely to be capped. I think 62/USD also looks difficult, so the broad range should be 62-63/USD for most of the time.
Latha: Does this confirm June rate cut. Therefore will you play differently a month down the line when the new ten-year comes or as we progress towards June?
A: I think June rate cut looks quite likely and this number also definitely increases the probability of June rate cut. I do not see rate cut impacting; it might temporarily.