The government securities market is expected to plunge tomorrow, according dealers. Gilts prices, which were rangebound today, will come under tremendous pressure as there will be panic selling, they said.
The rupee may also weaken against the dollar. A senior banker said prices of gilts could fall by at least Re 1.
The 10-year benchmark 7.40 per cent paper today opened lower at Rs 101.56 (yield 7.17 per cent) and closed at Rs 101.63 (7.16 per cent).
As the prices are set to crash, the yield will shoot up, dealers said.
The Reserve Bank of India (RBI) may intervene in the market if it goes haywire by conducting OMO (open market operation) purchases. Even a repo rate cut is not ruled out.
The spot rupee, which closed on Thursday at 48.41/42, could weaken at least by about 20 paise. However, panic will not grip the market as India's forex reserves are at over $62 billion -- enough to tackle any temporary blips. The RBI is unlikely to intervene and sell greenbacks in the market.
Forward premiums, especially at the far-end (12 months), initially could shoot up to touch 4.5 per cent as against today's close of 3.96 per cent. But with call money being rock steady at around 5.75 per cent forwards will cool off later, dealers said.
