With heavy buying ruled out, a rangebound run is ahead

OUTLOOK/ GOVERNMENT SECURITIES

The government securities market will see a rangebound run for some time with dealers refraining from heavy buying.

The apprehension is that liquidity, which used to be one of the major drivers of bond prices, might come under strain with the foreign institutional investors (FIIs) preferring to stay away from the Indian equity market.

FIIs have been net sellers in the equity market since the new government took power. Moreover, the common minimum programme, which was expected to put in perspective the Congress-led government's stance on various policy issues failed to cheer up sentiment. The document was perceived to be more aligned to the needs of the rural and agricultural segments.

In fact, dealers said at every attractive level, players will look forward to easing their positions.

Participants will prefer to wait till clarity on interest rate rates and the government stance on foreign investment policy emerges.

Naturally, the Union Budget remains the next big trigger, said a dealer. Inflation, too, was a dampener. As against 4.2 per cent in the week before last, it rose to 4.67 per cent last week.

With oil flaring up and commodity prices already on the ascend, the downside scope is little to nil for now.

This is despite the fact that the governor of the Reserve Bank of India, Yaga Venugopal Reddy, has reiterated that inflation will remain below 5 per cent.

Some bottom fishing to pick up bonds at low prices could be seen, which may prop up securities.

Dealers feel the ten-year benchmark yield will be pegged in the 5.25/35 per cent range.

The early part of the week might witness some selling pressure as players will make room to build up portfolio for the rest of the week so as to take advantage of triggers that pop up.