​​​
  1. RBI to conduct OMO purchase worth $40 billion by March-end, says Bank of America Merrill Lynch

RBI to conduct OMO purchase worth $40 billion by March-end, says Bank of America Merrill Lynch

Reserve Bank of India (RBI) is like to conduct additional open market operation (OMO) purchase worth USD 40 billion by March end to provide durable liquidity and contain rising government bond yields, says a report.

By: | Mumbai | Published: September 25, 2018 8:09 PM
RBI, OMO, Bank of America Merrill Lynch, durable liquidity, FPI The RBI will also then be able to avert a liquidity crunch with growth set to slow after October with base effects fading, it said.

Reserve Bank of India (RBI) is like to conduct additional open market operation (OMO) purchase worth USD 40 billion by March end to provide durable liquidity and contain rising government bond yields, says a report. Last week, RBI conducted one OMO worth Rs 10,000 crore and has announced a similar amount of OMO purchase this week, “We continue to expect the RBI to issue an OMO calendar that will assure durable liquidity, contain rising yields, reverse FPI outflows and stabilise rupee,” Bank of America Merrill Lynch said in a report.

It said OMOs should attract debt FPIs who can then reap potential capital gains which would help stabilise rupee. The RBI will also then be able to avert a liquidity crunch with growth set to slow after October with base effects fading, it said. The RBI, however, is delaying OMO, as it fears that this will signal weaker rupee and discourage debt FPIs, the report said.

“It (RBI) likely fears markets could see an infusion of rupee liquidity as a policy preference for a weaker rupee undermining its 4 per cent CPI target. We estimate one per cent depreciation impacts inflation by 20 basis points,” the report said. If FPI flows do not revive, the RBI will need to OMO an even larger USD 50 billion by March, it added.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Go to Top