The markets have also largely factored in a 25-basis-point (bps) rate hike by the RBI's Monetary Policy Committee next week, he added. Parthasarthy expects the benchmark 10-year bond yield to stay in a broad range of 7.20-7.50% over the next six months, compared to the 7.29% currently.
There could be a downward move if U.S. Treasury yields slide, especially if views of a Fed rate cut this year become more prominent, he said. On the other hand, a move towards 7.50% cannot be ruled out amid excess supply pressure because of the government's borrowing plan, he added. The 10-year bond yield had dropped to 7.24% in intraday trades on Thursday after the federal government said it aims to gross borrow a less-than-expected 15.43 trillion rupees ($187.54 billion) through the sale of bonds in FY24, starting in April. Depending on how demand-supply dynamics play out in the debt market, there is a possibility that the RBI may have to resort to bond purchases through open market operations in the second half of FY24, Parthasarthy said.
He expects the rupee to stay in an 81-83.50 range against the dollar for a "large part" of this year and dollar inflows to start pouring into India, pushing forward premiums higher and ultimately benefiting the rupee. However, once the rupee appreciates towards 81 levels, the RBI will start building its forex reserves to neutralise the impact of cash liquidity and maintain external account stability, the HDFC Bank treasurer said. The RBI has already resorted to buying dollars as the rupee has stabilised, forex market participants have said. Forex reserves rose to a near-six-month high of $573.7 billion in the week through Jan. 20. ($1 = 82.2750 Indian rupees) (Reporting by Siddhi Nayak and Swati Bhat; Editing by Janane Venkatraman)
