Greater opportunities beckon in new year
The 10-year benchmark did touch a high of 8.7% in April as sentiment was hurt by considerable fiscal slippage in FY12 and announcement of higher borrowing in the first half of the fiscal. But RBI’s OMO support, lower growth numbers, reform initiatives, and global risk aversions kept the benchmark yield around 8.2%. Easing liquidity conditions helped the shorter end of the yield curve.
Better outlook in 2013
Growth is expected to bottom out and improve next year as reform initiatives and better sentiments translate to higher activity levels. Inflation numbers have already come in below projected levels for the past two months. Next year, inflation is expected to come down further — the lowest in three years. RBI has indicated a shift in stance to support growth and, finally, rates amy move down. Fiscal deficit target is obviously very challenging to achieve, but it is encouraging to see that government is serious about cutting expenditure. If the fiscal deficit approximates 5.3%, market is well positioned to
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