The 7.45% level could stay put for over the next three
months once fresh supply starts, with levels of 7.25% "very
tough to be broken on the downside," Srivastava, whose firm
manages debt assets of around 120 billion rupees ($1.46
billion), said.
Even though the government's bond supply is lower than estimates, it remains elevated as compared to the current year, raising concerns about demand and supply dynamics for the next year, various traders have said.
Srivastava was not ruling out the possibility of the Reserve Bank of India hiking its policy repo rate once more in addition to a raise at its next meeting on Feb. 8, for which markets have priced in a 25-basis-point rate hike.
He also expects the Fed to raise rates by another 50 basis points to take the terminal rate at 5.00%-5.25%. "We expect the RBI to hike repo rate by 25 bps next week, followed by a similar action in April, as core inflation pressures still exist," the investment official, who and sees terminal repo rate at 6.75%, added.
The rise in policy rate will push the benchmark bond yield higher in the new financial year, which would be a good time for investors to accumulate duration.
"Interest rate is expected to remain at peak level in
foreseeable future. We may not move lower in a hurry," he said.
($1 = 82.2420 Indian rupees)
(Reporting by Dharamraj Dhutia; Editing by Nivedita
Bhattacharjee)
