Don’t expect RBI to cut CRR in March: Ashish Ghiya, Derivium Tradition
The RBI may yet continue with one or two OMOs, but would not go for the CRR cut on the 19th March, says Ashish Ghiya of Derivium Tradition
In an interview with ET Now, Ashish Ghiya, MD, Derivium Tradition, gives his views on the bond market as well as the upcoming RBI policy. Excerpts:
ET Now: What would be your outlook for the bond yields because they do continue to remain flat? What do you think would be the major data point that they are watching for -- IIP and inflation or the monetary policy?
Ashish Ghiya: The next round of the run clearly happens from the monetary policy actions, which are expected on the 19th of March. The market is again in that phase where they are hoping for a 25 bps cut, but would rather wait for the governor to make the announcement.
ET Now: How disappointed would you say the bond markets are for the lack of an OMO action and what do you think will be done by way of a CRR cut perhaps in order to assuage the liquidity situation?
Ashish Ghiya: The RBI may yet continue with one or two OMOs, but would not go for the CRR cut on the 19th March. They have done the liquidity infusion through CRR in January. If needed, they may possibly do one more in May, but he may give it a pass on CRR cut in March.
ET Now: Would the near term or the three month-six month-one year look be that bond prices could be higher from where they are right now and that would probably aid people in making a decision?
Ashish Ghiya: I would believe so because we are at the beginning of the policy rate cut cycle. So we have another three-four months very clearly where the bond prices could perk up because of the monetary policy actions. We could have a period where the RBI could continue infusing liquidity through OMOs. So there is a good run up for the next three months. Though I am not an investment advisor in my own right, but clearly to answer your question, yes.
ET Now: How would you expect the inflation trend to continue now? What kind of a reading can we expect next week?
Ashish Ghiya: Inflation prints are on a lower trajectory right now. So the next week will not be very different. We are expecting another 6.5-6.6 kind of reading. It continues on a lower trajectory going up to June and we will see how the diesel price hike starts getting incorporated, but that is going to be in a very slow manner.
ET Now: And how much truth can we attribute to all of the information we have been getting of late for the growth projections that it will be above 6% and that all of the concerns for the Indian economy seem to have bottomed out now?
Ashish Ghiya: That is yet another feature where there is factor of a base effect as well as the hope building out there. A lot of this is expected because of the latest round of measures which the finance minister has been taking for the last three to four months and a lot has been built into these numbers that the FM-related measures start kicking in. But we would rather see this before we start partying along in terms of getting back into a 6% growth trajectory. We need to see a couple of stronger readings from the low that we have seen last week to go there.
ET Now: What would be your outlook for the bond yields because they do continue to remain flat? What do you think would be the major data point that they are watching for -- IIP and inflation or the monetary policy?
Ashish Ghiya: The next round of the run clearly happens from the monetary policy actions, which are expected on the 19th of March. The market is again in that phase where they are hoping for a 25 bps cut, but would rather wait for the governor to make the announcement.
ET Now: How disappointed would you say the bond markets are for the lack of an OMO action and what do you think will be done by way of a CRR cut perhaps in order to assuage the liquidity situation?
Ashish Ghiya: The RBI may yet continue with one or two OMOs, but would not go for the CRR cut on the 19th March. They have done the liquidity infusion through CRR in January. If needed, they may possibly do one more in May, but he may give it a pass on CRR cut in March.
ET Now: Would the near term or the three month-six month-one year look be that bond prices could be higher from where they are right now and that would probably aid people in making a decision?
Ashish Ghiya: I would believe so because we are at the beginning of the policy rate cut cycle. So we have another three-four months very clearly where the bond prices could perk up because of the monetary policy actions. We could have a period where the RBI could continue infusing liquidity through OMOs. So there is a good run up for the next three months. Though I am not an investment advisor in my own right, but clearly to answer your question, yes.
ET Now: How would you expect the inflation trend to continue now? What kind of a reading can we expect next week?
Ashish Ghiya: Inflation prints are on a lower trajectory right now. So the next week will not be very different. We are expecting another 6.5-6.6 kind of reading. It continues on a lower trajectory going up to June and we will see how the diesel price hike starts getting incorporated, but that is going to be in a very slow manner.
ET Now: And how much truth can we attribute to all of the information we have been getting of late for the growth projections that it will be above 6% and that all of the concerns for the Indian economy seem to have bottomed out now?
Ashish Ghiya: That is yet another feature where there is factor of a base effect as well as the hope building out there. A lot of this is expected because of the latest round of measures which the finance minister has been taking for the last three to four months and a lot has been built into these numbers that the FM-related measures start kicking in. But we would rather see this before we start partying along in terms of getting back into a 6% growth trajectory. We need to see a couple of stronger readings from the low that we have seen last week to go there.
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