Market viewed note ban positively: Finmin

By: | Published: February 22, 2017 4:11 AM

The government said on Tuesday demonetisation was “viewed positively” by the market, as deposits were expected to surge in banks, and led to bullish sentiment, especially for short-end bonds.

India’s public debt rose to R61.76 lakh crore at the end of December, 2.4% higher than the previous quarter, the report said. The debt (excluding liabilities under the public account) was R60.33 crore at end-September 2016. (Reuters)

The government said on Tuesday demonetisation was “viewed positively” by the market, as deposits were expected to surge in banks, and led to bullish sentiment, especially for short-end bonds. “The bullish market sentiment was however, restrained to a certain extent with US 10-year treasury yield rising to 2.15% level which led to dollar strengthening adversely affecting the market,” the finance ministry said in its quarterly debt management report. Relatively low inflation figures, both WPI and CPI, further supported the market with yields making fresh seven-and-a-half-year lows. “However, the market was restrained to a certain extent on hardening of US Treasury yields on likely expectations of adoption of stimulative economic policies by the New US President elect,” the report said.

It added that the domestic currency continued to trade with volatility during November and even breached all-time low levels but adequate liquidity ensured position building across securities in the bond market.

The domestic currency hit an all-time intra-day low of 68.86 against the dollar on November 24, 2016, amid concerns about of demonetisation and a possible rate hike by the US Federal Reserve in the near term. Intermittently, the rupee gained on few occasions to touch a quarter high of 66.43 against the dollar on November 9, 2016, ahead of US presidential election result and on others occasions due to positive CPI and industrial production data.

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The deficit in liquidity was at an average of R3,065 crore in October but turned into a surplus in November (average R5.19 lakh crore) after demonetisation and increasing further in December last year (average R7.04 lakh crore), the report said.

India’s public debt rose to R61.76 lakh crore at the end of December, 2.4% higher than the previous quarter, the report said. The debt (excluding liabilities under the public account) was R60.33 crore at end-September 2016.

“This represented a quarter-on-quarter (QoQ) increase of 2.4 per cent (provisional) in Q3 FY17 as compared with an increase of 2.1% in the previous quarter (Q2 of FY17),” it said.

Internal debt accounted for 92.6% of public debt at the end of December 2016, while marketable securities made up for 83.6%, it said.

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