Gilts to remain rangebound as traders look for quick profits

OUTLOOK/ GOVERNMENT SECURITIES

Government securities market will remain range-bound and the market dealers will refrain from heavy buying. In fact, dealers said that at every attractive levels, players will look forward to ease their positions by making quick profits.

The entire market will wait till clear signals emerge about the interest rates and the new government's stance on the foreign investment policy.

Dealers said that though the market has discounted the fact that there will be no more rate cuts, as the global outlook is for a possible hike.

Even though inflation rate remained unchanged at 4.2 per cent, the market players did not read much into it. They believe that oil price hike is imminent, after the new government takes charge, and that will shoot up the inflation rate.

This then will be the decisive factor for the market both in terms of interest rates and inflation. Till then, bottomfishing to pick up bonds at low prices, will help in some amount of recovery.

Dealers feel that this week, the ten year benchmark will be pegged in the range of 5.15-25 per cent.

Initial part of the week might witness some selling pressure as most of the players will make room for building up portfolio for the rest of the week in anticipation of any trigger points. Tap sale of state government loan will also put a slight pressure on the market.

Last week, the political uncertainty at the Centre tormented the equity market, its ripple effects were also felt in the bond markets.

As a result, bond prices fell in successive trading sessions as most of the players engaged in profit selling.

The underlying sentiment was marred by the fact that the slowdown in the foreign exchange inflows, in the medium run, will lead to pressure the liquidity. Such a scenario has forced the bond dealers in the Indian market to take a relook at the interest rate structure.