Debt markets: Coming of age - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Debt markets: Coming of age

Mar 15, 2001

In the past few days while the equity markets crashed, debt markets witnessed a steady buying interest. However, compared to large volumes in the post budget week, liquidity in the debt markets declined to a certain extent recently. After remaining subdued during the period May November 00, the activity in the debt markets picked up with the expectation of southward movement of interest rates. The volumes in the markets started rising beginning from December. The debt markets got a further boost with the benefits provided by the budget, which were above expectations.

The prices of government securities rallied with a cut in interest rates. While the prices of GOI securities moved up by Rs 2-3, the 10-year yield fell to a historical low level. Subsequently, players started unwinding long positions and profit booking was witnessed across the board. Speculative positions, which were built up before the budget were squared off after the rate cut.

During this period, the liquidity in the markets remained easy as the first phase of CRR cut released Rs 20.5 bn into the banking system (this indicates high inflow of funds in the debt markets). However, in the short term the liquidity in the markets is likely to be capped by the year- end advance tax outflows. The slide in the equity markets impacted the forex rates and the fresh flow of funds into the debt markets. The debt oriented mutual funds opted to book profits as they had already built up higher positions before the budget in the expectation of an interest rate cut. On the demand side too, the government borrowings have completed almost 93% of its budgeted borrowings. This could drive the bond prices downward with profit booking at every level.

Nevertheless, the prospects for debt markets seems bright as volumes are increasing every day with comparatively less volatility than equity markets. For the year ended March 01, the turnover of the system is expected to jump by over 25% to Rs 5,000 bn. Currently only institutions, banks and corporates are large players in the markets. While the exposure of retail investor is significantly low due to lack of awareness. Since the returns provided by the government securities are relatively lucrative and safe, more investments is likely to come which in turn would further improve the liquidity in the markets.

Equitymaster requests your view! Post a comment on "Debt markets: Coming of age". Click here!

  

More Views on News

How the YES Bank Collapse Unfolded - 10 Points (Sector Info)

Mar 9, 2020

A timeline of how YES Bank went from a stock market darling to a pariah.

Today's Stock Market Crash: 10 Points (Sector Info)

Mar 6, 2020

Top factors that dragged the markets lower today.

More Views on News

Most Popular

A Critical Update on the Market (Fast Profits Daily)

Mar 30, 2021

In this video, I'll tell you why I am recommending caution in the market at this time.

My Recent Recommendation Will Profit from the Global Supply Chain Crisis (Profit Hunter)

Mar 31, 2021

A tiny chemical company, started in the Licence Raj era, is a great example of a new wealth creating opportunity.

My Stock Trading Strategy (Fast Profits Daily)

Mar 31, 2021

In this video I'll show you exactly how I go about picking stocks for trading.

What You Need to Find Hundred Baggers (Profit Hunter)

Mar 30, 2021

100 baggers of the last decade share this common trait. Here's how to use it to nail future multibaggers.

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE BANKEX


Apr 9, 2021 (Close)

S&P BSE BANKEX 5-YR ANALYSIS

COMPARE COMPANY

MARKET STATS