Gilts market turns bullish

The US Federal Reserve pausing interest rate hikes made the Indian government securities market turn bullish after a long gap.

The July first quarter review by the Reserve Bank of India (RBI) had dampened the market sentiment with a 25 basis points hike in reverse repo rate.

The US Federal Open Markets Committee for the first time after 17 successive 25 basis points rate hikes left the base Fed rate unchanged at its meeting on Tuesday since the economic data did not show a healthy economy.

Tracking this, the prices of Indian government securities shot up across maturities by 40-50 paise with the yield on the ten-year paper closing at 8.10 per cent, three basis point lower than the closing benchmark rate of 8.13 per cent on the June quarter.

As against a tepid volumes of Rs 500-1,000 crore during last few months, the market today witnessed a secondary market trading volumes rising to around Rs 3,500 crore.

There was buying demand from almost all banks and provident funds and insurance companies. However, the dealers now expect the market to consolidate around 8.10-8.15 per cent.

The spot rupee in the foreign exchange market, on the other hand, shared the cross currency bullishness globally against dollar which took a severe beating. It opened at 46.56/57 to a dollar but closed at a high of 46.44/45 to a dollar.

However, taking the advantage of an appreciating rupee to dollar, most of the corporate especially oil companies jumped in to buy dollars .

This pushed up the annualised premiums for the dollars booked for the future date (forward dollars). The annualised premiums for the six-month and one"�year dollars closed at 1.18 per cent and 1.24 per cent as against 1.08 per cent and 1.17 per cent, respectively.