Bonds steady on fisc ishq, Re fears foreign fund flight

The

rupee

closed at a new low of 83.69 against the dollar on Tuesday, down three paise from its previous close of 83.66. The currency was under pressure because of volatility in the stock markets coupled with uncertainty over the US political situation. Dealers said that there were transactions at 83.71 in intraday trade. While RBI did intervene, it was not seen as aggressively defending the rupee.
“With the US elections in focus and the Fed’s policy decision at the end of the month on July 31, rupee volatility near the lower range continues,” Jateen Trivedi, VP at LKP Securities, said.

“The rupee range can be seen between 83.45 and 83.90 in upcoming sessions.”
The rupee has been under pressure since Monday following a decline in the Chinese yuan even as RBI has been preventing a sharp slide.
In govt bond

market

after the

FM

said that India will continue its pre-set fiscal consolidation path, there was a short rally in bond prices (and consequently yields softened) with the

yield

on the benchmark 10-year gilt falling to 6.92%. However, at close, the yield was at 6.96% – barely changed from Monday’s close.

The bond market also got a boost from the FM’s statement that govt would marginally cut its market borrowing limit to Rs 14.01 lakh crore from Rs 14.13 lakh crore set earlier, dealers said. This would also help in keeping the interest rate from going up, they said.
The FM also proposed to reduce the long term holding period for listed debt securities to two years from three. She proposed to cut long term capital gains tax on these securities to 12.5% from 20% earlier. Bond investors said this could give a boost to trading and investing in corporate

bonds

in India.