As FINMAN Mr. Mukherjee announced in his budget speech about his planning to bring down fiscal deficit from the current level of 6.5% of GDP (FY-10) to 4.8% of GDP in FY-12 and then 4.1% in following years and hopefully this announcement will result as a relief for investors. Our debt market and equity market already has been shown their favorable reflection towards this announcement as sensex surged and bond yield eased a bit within the day.
This can be said that investors were expecting to soften the bond yield as govt. will be raising lesser amount from market but however the bond yield behaved in last 12-15 day, it seems that "abhi dilli door hai". The yield of 10 year G-Sec was 7.8% on 25th Feb and shot up by 21bps after the announcement.
As there are various factors and economic events happening continuously in the market and the one important can be stated as credit growth which improved from 11% to 15% (which is latest one). There are other reasons also like very recent announcement of ICICI and HDFC bank to hike the lending rate and on another hand decision to discontinue the special home loan schemes which offers lower interest rates in first few years which means that even banks are now gearing up for higher interest rat. The interesting question to ask is :"Will rise in interest rate thwart the revival in the Indian economy?"
Most of the market pandits does not seems to agree with this as the lucrative figures and numbers are appearing regularly like few expects to 10 year G-Sec yield will remain in the range of 8%. The very recent performance of IIP which has been left negative territory and has shown much brightening picture as the latest pointer arrives at 16.8%. If the things will keep moving like this in near future then definitely a few bps hike in lending rate will not make a huge impact on economy.
This can be said that investors were expecting to soften the bond yield as govt. will be raising lesser amount from market but however the bond yield behaved in last 12-15 day, it seems that "abhi dilli door hai". The yield of 10 year G-Sec was 7.8% on 25th Feb and shot up by 21bps after the announcement.
As there are various factors and economic events happening continuously in the market and the one important can be stated as credit growth which improved from 11% to 15% (which is latest one). There are other reasons also like very recent announcement of ICICI and HDFC bank to hike the lending rate and on another hand decision to discontinue the special home loan schemes which offers lower interest rates in first few years which means that even banks are now gearing up for higher interest rat. The interesting question to ask is :"Will rise in interest rate thwart the revival in the Indian economy?"
Most of the market pandits does not seems to agree with this as the lucrative figures and numbers are appearing regularly like few expects to 10 year G-Sec yield will remain in the range of 8%. The very recent performance of IIP which has been left negative territory and has shown much brightening picture as the latest pointer arrives at 16.8%. If the things will keep moving like this in near future then definitely a few bps hike in lending rate will not make a huge impact on economy.
