"There have been lot of inflows in the equity and the debt segment also. That gives me a confidence that rupee should be stable for the next three-six months," adds Wadhwan in an interview to CNBC-TV18.
Also read: Buy Indian Rupee above 54.12; target 54.30: ICICIdirect
On the recent monetary policy, wherein the RBI cute repo rate by 25 basis points (bps), Wadhwan expects the bond yield rate to come down over a period of time.
Below is the edited transcript of Wadhwan's interview to CNBC-TV18.
Q: How would you sum up the mood right now in the bond market especially and what kind of levels are people working with in terms of barometers even for the benchmark bond and what it could trade at?
A: With the way things are and the repo rate finally being cut, the tone was a bit neutral and it gave a sense that Reserve Bank of India (RBI) may not be cutting further. RBI has cut rates thrice in the last three months. Over a period of time, this will get transmitted to the market also. We have seen bond yields not reacting at all but I think over a period of time, as this thing sinks in, one may see yields drifting down.
Q: The first Open Market Operations (OMO) for the fiscal is out. What kind of appetite do you expect it to see? How easy do you think the RBI is going to be with OMOs this fiscal?
A: That has been one of the questions which were raised to the governor. He replied that OMOs are not necessarily the only tool. In our view, OMOs are going to be as important as the other measures of liquidity. We expect around Rs 30,000-40,000 crore of OMOs in the first quarter itself. They should be followed up as it has been done in the last year. The number could be similar to what they did last year. So, one can expect OMOs of around Rs 1,30,000-1,50,000 crore for the full year.
That should take care of lot of the frictional liquidity what he is talking about. I think OMOs would be reasonably successful. You will have to see it in the conjunction of how the data pans out as RBI is pointing out. If there are scopes of further rate cuts, then you might see the banks not tendering exactly what RBI would be expecting. So, at that time, if there are high expectations of further rate cuts with inflation lowering, you might see the tendering to be a bit on the lower side. But in the initial phase you can expect reasonable tendering in the first four-five OMOs which are going to happen in the next two months.
Q: In that context, how do you see the currency moving? There has been some relief over the last few days. Where do you think the rupee could stabilise at in the near term?
A: If one looks back at the last six months or so, ever since January, rupee has behaved quite stable. We feel that the way things are panning out even with trade deficit number of USD 12-15 billion a month which is on expected lines, the capital flows are such that they would balance it out. So, I would take a call that rupee should be quite stable in at least three-six months with the way things are looking like, the kind of capital flows what we expect and what we have seen in the last four months. There have been lot of inflows in the equity and the debt segment also. That gives me a confidence that rupee should be stable for the next three-six months.
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