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Mint
4 days ago
- Business
- Mint
Will the RBI rate cut push Indians to swap fixed deposits for stock market investments?
In a surprise move, the Reserve Bank of India announced a 50 basis point reduction in the repo rate during the second bi-monthly MPC meeting on Friday, bringing the rate down to a three-year low of 5.5%, signalling the regulator's confidence in India's overall sound macroeconomic condition. With inflation easing, the central bank has shifted its focus to reviving growth, affirming that India's growth story remains strong despite global uncertainties. This move is expected to benefit both consumers and businesses, as lower costs will encourage buyers to spend more on big-ticket items and encourage companies to pursue capital expenditure activities. While the RBI's action may benefit borrowers, it could impact savers who continue to rely on traditional investment avenues such as fixed deposits to park their savings for risk-free returns. Traditionally, Indians have favoured fixed deposits to beat inflation, although this trend has changed in recent years, especially after the Covid-19 pandemic, when young Indians began preferring investments in stocks through the Demat and mutual fund routes as a way to participate in India's growth story. However, experts believe that the RBI's total cut of 100 basis points since February may further encourage more Indians to shift their investment landscape from fixed deposits to stock investing. Swapnil Aggarwal, director of VSRK Capital, said, "The reduction in interest rate will impact returns on fixed deposits, which were attractive during the high-rate period. With a decline in FD rates, we expect an increased shift in investors to mutual funds, debt instruments, and other market-linked products." "This may result in renewed investments into the capital markets, which would improve liquidity and growth. In general, these changes have the potential to positively influence the credit, consumption, and investment cycles in the economy," Swapnil further added. Vishal Goenka, co-founder of said, "A balanced policy encourages growth. Fixed deposit rates to come down sharply as banks transmit this rate cut. Investors should look at 2–3-year corporate bonds for their portfolio, as they continue to offer good spreads over government and FD rates, and interest rates will come down more gradually for corporate bonds.'
Mint
02-06-2025
- Business
- Mint
India rupee, bonds expected to move higher in run-up to RBI policy decision
By Dharamraj Dhutia and Jaspreet Kalra MUMBAI, June 2 (Reuters) - The Indian rupee is likely to kick off the week on a positive note, boosted by stronger-than-expected economic growth data, and, alongside government bonds, will be influenced by the central bank's monetary policy decision, due on Friday. The rupee closed at 85.5075 against the U.S. dollar last Friday, down 0.4% in a week dominated by choppy price action across forex markets. Data after the market close on Friday showed India's gross domestic product (GDP) grew 7.4% in the January-March quarter, the fastest in a year, and above economists' expectations of 6.7%. The strong growth may lift equities, which should help the rupee both via portfolio inflows and a sentimental boost, a trader at a foreign bank said. Traders expect the rupee to hover in a 84.80-86 range in the near term. Developments surrounding U.S. tariff policies also be in focus this week. U.S. President Donald Trump on Friday accused China of violating a bilateral deal to roll back tariffs and announced a doubling of worldwide steel and aluminum tariffs to 50%. A team of U.S. trade officials, meanwhile, is slated to visit India on June 5-6. The Reserve Bank of India is widely expected to deliver a third straight 25-basis-point rate cut on June 6, lowering the key rate to 5.75%. "The big macro picture for INR and India is that inflation is likely to remain manageable for some time ... with CPI expected to remain below 4% over the next few quarters," MUFG Bank said in a note. India's 10-year benchmark 6.33% 2035 bond yield pared its earlier losses to end flat at 6.2308% on Friday. It fell to 6.1672% in the week. Traders anticipate the yield to move between 6.18% and 6.26% until the RBI decision. The five-year bond yield outperformed the 10-year yield for a third straight month in May. "There has been a bull-steeping in the bond market. The market anticipates the RBI will cut rates and is at extreme bullish positioning," said Vishal Goenka, co-founder of bond trading platform, Capital Economics expects growth to remain strong over the coming quarters and eyes a further 50 bps of interest rate cuts. ** May HSBC manufacturing PMI - June 2, Monday (10:30 a.m.) ** May HSBC services PMI - June 4, Wednesday (10:30 a.m.) ** RBI monetary policy decision - June 6, Friday (10 a.m.) ** May S&P Global Flash manufacturing PMI final - June 2, Monday (7:15 p.m. IST) ** May ISM manufacturing PMI - June 2, Monday (7:30 p.m. IST) ** April factory orders - June 3, Tuesday (7:30 p.m. IST) ** May S&P Global composite PMI final - June 4, Wednesday (7:15 p.m. IST) ** May S&P Global services PMI final - June 4, Wednesday (7:15 p.m. IST) ** May ISM non-manufacturing PMI - June 4, Wednesday (7:30 p.m. IST) ** April international trade - June 5, Thursday (6:00 p.m. IST) ** Initial weekly jobless claims (for week to May 26) - June 5, Thursday (6:00 p.m. IST) ** May non-farm payrolls and unemployment rate - June 6, Friday (6:00 p.m. IST) (Reporting by Dharamraj Dhutia and Jaspreet Kalra; Editing by Savio D'Souza)
Reuters
07-04-2025
- Business
- Reuters
Fall in yields triggers rare $4.5 billion debt issue from Indian firms at fiscal year onset
MUMBAI, April 7 (Reuters) - Indian companies are set to borrow $4.5 billion by selling bonds in the first five trading sessions of April to take advantage of the plunge in yields, a rare move as they typically do not need major funds at the start of a new financial year. The sales include planned issues worth more than $2 billion on Tuesday, the end of the five-day run that will have included at least 15 companies tapping the bond market. Yields on AAA-rated up-to-five-year corporate bonds have dropped 25-30 basis points in April, while those for the longer-term papers have plunged 20-25 bps. This "has triggered strong demand for bonds, pushing yields lower right from the beginning of April," said Venkatakrishnan Srinivasan, founder and managing partner at debt advisory firm Rockfort Fincap. "This favorable shift has encouraged issuers to front-load their fundraising plans." The Reserve Bank of India has infused more than 5.20 trillion rupees ($60.62 billion) through debt purchases and foreign exchange swaps since the start of 2025. Consequently, India's banking system liquidity moved into surplus towards March-end and has now jumped to its highest level in the last five months. Additionally, the RBI plans to buy bonds worth another 600 billion rupees in April. This unexpected rush of borrowing underscores the changing dynamics of India's financial landscape, signalling potential benefits for investors and companies in the short term. "The demand for stable returns, coupled with ongoing uncertainties in stock markets, naturally aligns with the risk-averse sentiment of investors," said Vishal Goenka, co-founder of bond trading platform Markets are expecting an additional 75 bps of rate cuts in 2025, after the central bank cut rate by 25 bps in February. While most of the issuances are dominated by non-banking financial companies, which are selling shorter-duration papers, some state-run firms are also tapping the market with longer-tenor debt. "State-run firms could lock in long-term funding at relatively lower yields. A well-rated state-run company tapping the market for five to ten years should comfortably achieve yields of 7% or lower, especially if the issue is structured well and demand is managed strategically," Rockfort Fincap's Srinivasan added. Companies that have raised or plan to raise funds in billion rupees: Companies Duration Funds raised/ in the pipeline Muthoot Finance 3 years 15 Shriram Finance 3 years 18.75 Muthoot Finance 3 years and 49 days 15 HDB Financial 3 years and 2 months 15 Tata Capital 3 year and 3 months 11.75 Aditya Birla Housing Finance 3 years and 5 months 6.65 LIC HF 4 years and 10 months 20 NABFID 5 years 14.7 Tata Capital 5 years 15 Bajaj Finance 5 years 30 Axis Finance 5 years 6 Shriram Finance 5 years and 3 months 18.75 India Infradebt 5 years and 5 months 10 Cholamandalam Investment 7 years 10 NIIF Infra Finance 7 years and 1 month 2.5 NIIF Infra Finance 9 years and 8 months 5 NABFID 10 years 42.4 Bajaj Finance 10 years 29.9 Bajaj Finance 10 years 40 Bajaj Housing Finance 10 years 20 REC 15 years 30 ($1 = 85.7760 Indian rupees)
