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In an interview with ET Now, Ashish G hiya, MD, Derivium Tradition (India) , shares his views Indian markets and the current market rally. Excerpts:
ET Now: What is the broad range within which we can expect the 10-year benchmark to trade at?
Ashish Ghiya: The broad range for 10-year benchmark will be 8.10 -8.40 on the higher side.
ET Now: We had the OMO operations which have infused close to Rs 30,000 to 40,000 crore CRR cut. Do you believe that it is going to soothe the liquidity deficiency that we are seeing in the system so far?
Ashish Ghiya: The liquidity in the next couple of months is going to be challenging. Structural liquidity deficit grows for two reasons. It will keep on growing because of the currency in circulation going up largely. This is because of the elections and as the year end comes, there will be a drag as banks will tend to increase a deposit base. So, there will be more CRR maintenance. Therefore, the RBI needs to do some more in terms of OMOs and CRR cuts.
ET Now: Do you expect that by the end of March, the deficit problem will get addressed?
Ashish Ghiya: I believe that will happen in the first week of April.
ET Now: Is there any probability for the rates to cool off? What factor would you believe that would be contingent on?
Ashish Ghiya: Rates are already cooled off. If we look at the rates from where we started in November, they are already way off now. I do not think they will go higher drastically. So, they will go down further but that will now be contingent on RBI cutting policy rates which is expected in April.
ET Now: Over the last few months the equation between bank and non-bank credit to the commercial sector is now more in favour of the non-bank credit. Do you expect this trend to continue to hold up over the next few months or do you believe it will change back in favour of bank credit?
Ashish Ghiya: It will change partly in favour of bank credit. One of the reasons for that is going to be the interest rate cycle turning. So, as the interest rate cycle turns and as the banks gets more liquidity, they will get more aggressive in terms of either cutting base rates or giving more credit to the corporate sector. I do expect a correction to happen may be in the next fiscal year.
ET Now: What kind of trajectory are you penciling in for the rupee and what factors do you believe that it will be driven by?
Ashish Ghiya: The rupee battle has been won by the RBI. The battle has been won in terms of arresting the slide and the confidence. Part flows or a lot of flows have come in. Going ahead in terms of flows it remains balanced. NRE deposits will pick up a lot steam in the coming few months. So, the trajectory remains in the band of may be 51.5-52 on the higher side if the Euro crisis pans out more worse than we think. On the lower side, around 47 can be a band.
ET Now: The IIP numbers that came out today look bad. Is the market somewhere building in an expectation that on the 15th of March, we will see additional action from the RBI - not just a CRR cut but they will also get started on the repo rate front?
Ashish Ghiya: I do not think markets will start pricing in a repo rate cut immediately because of the lower IIP numbers. This is because RBI has always been apprehensive about the volatile component in the IIP which is the capital market goods index. I believe the sector has been jumping. It is a factor that builds further view that slowdown is for real but the number to watch out next is inflation number.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
In an interview with ET Now, Ashish G hiya, MD, Derivium Tradition (India) , shares his views Indian markets and the current market rally. Excerpts:
ET Now: What is the broad range within which we can expect the 10-year benchmark to trade at?
Ashish Ghiya: The broad range for 10-year benchmark will be 8.10 -8.40 on the higher side.
ET Now: We had the OMO operations which have infused close to Rs 30,000 to 40,000 crore CRR cut. Do you believe that it is going to soothe the liquidity deficiency that we are seeing in the system so far?
Ashish Ghiya: The liquidity in the next couple of months is going to be challenging. Structural liquidity deficit grows for two reasons. It will keep on growing because of the currency in circulation going up largely. This is because of the elections and as the year end comes, there will be a drag as banks will tend to increase a deposit base. So, there will be more CRR maintenance. Therefore, the RBI needs to do some more in terms of OMOs and CRR cuts.
ET Now: Do you expect that by the end of March, the deficit problem will get addressed?
Ashish Ghiya: I believe that will happen in the first week of April.
ET Now: Is there any probability for the rates to cool off? What factor would you believe that would be contingent on?
Ashish Ghiya: Rates are already cooled off. If we look at the rates from where we started in November, they are already way off now. I do not think they will go higher drastically. So, they will go down further but that will now be contingent on RBI cutting policy rates which is expected in April.
ET Now: Over the last few months the equation between bank and non-bank credit to the commercial sector is now more in favour of the non-bank credit. Do you expect this trend to continue to hold up over the next few months or do you believe it will change back in favour of bank credit?
Ashish Ghiya: It will change partly in favour of bank credit. One of the reasons for that is going to be the interest rate cycle turning. So, as the interest rate cycle turns and as the banks gets more liquidity, they will get more aggressive in terms of either cutting base rates or giving more credit to the corporate sector. I do expect a correction to happen may be in the next fiscal year.
ET Now: What kind of trajectory are you penciling in for the rupee and what factors do you believe that it will be driven by?
Ashish Ghiya: The rupee battle has been won by the RBI. The battle has been won in terms of arresting the slide and the confidence. Part flows or a lot of flows have come in. Going ahead in terms of flows it remains balanced. NRE deposits will pick up a lot steam in the coming few months. So, the trajectory remains in the band of may be 51.5-52 on the higher side if the Euro crisis pans out more worse than we think. On the lower side, around 47 can be a band.
ET Now: The IIP numbers that came out today look bad. Is the market somewhere building in an expectation that on the 15th of March, we will see additional action from the RBI - not just a CRR cut but they will also get started on the repo rate front?
Ashish Ghiya: I do not think markets will start pricing in a repo rate cut immediately because of the lower IIP numbers. This is because RBI has always been apprehensive about the volatile component in the IIP which is the capital market goods index. I believe the sector has been jumping. It is a factor that builds further view that slowdown is for real but the number to watch out next is inflation number.
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