Foreign institutional investor sentiment for Indian debt should improve from June, Vivek Rajpal of Nomura India told CNBC-TV18.
He said bond yields would soften hereon and that the RBI was likely to cut interest rates by 25 basis points at its June policy review meet.
Below is the transcript of Vivek Rajpal's interview with Ekta Batra & Anuj Singhal on CNBC-TV18.
Anuj: Now that we have new 10-year, what kind of yield trajectory would you expect in the near term?
A: Our outlook on India bond is benign in the sense expect bonds to rally, yields to go down. One of the reasons was that older benchmark was running out of flavour and that reason has been taken care. There are expectations around monetary policy, inflation picture is looking benign. On the external front oil price is an important consideration but for the time being it looks like it is stabilising. I think local and external factors are favourable and we should see decline in bond yield.
Ekta: We saw an outflow of around 8,000 crore from the debt market from the foreign institutional investors (FIIs) in the month of May up to now. When do you expect it to turnaround?
A: We should see improvement in sentiment over coming weeks. I would expect June to be a good month. This should be on the back of monetary policy expectations as well as some of the improving technical factors. If oil prices stabilise and which looks like to be the case then I would not expect the continuation of what we have seen in May.
Ekta: The one key reason which you might attribute to the FIIs pulling out from the debt market as well as maybe turning the corner and starting to reinvest. What would be the two key reasons on either side?
A: Two key reasons would be – (1) on the external front if the commodity picture remains fine, if oil remains stable then that will be an important consideration and (2) as far as India’s macro remains favourable, as far as inflation continues to remain at a low levels, we should see the long-term interest in Indian debt.
Anuj: What is your expectation from the Reserve Bank of India (RBI)? There is a bit of consensus now on 25 bps rate cut or at least building towards that. Would you be in the same camp?
A: Yes, we are expecting.
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