10-yr yield at 7.5% is like a goldilocks level: Parul Mittal Sinha
Parul Mittal Sinha, head-financial markets, India at Standard Chartered Bank. In an interview with Bhaskar Dutta, she said the Indian rupee will be relatively better performing despite the strengthening US dollar. Edited excerpts:
The RBI sounds hawkish but when it comes to action it is not so harsh. How do you read the central bank?
Our expectation is that the RBI will not do any more rate hikes. In the previous policy, they did mention that they are very focused on bringing inflation down. They think that their policy measures are taking effect; it's going to be a slower move than probably anticipated earlier. We think there isn't a need to raise the repo rate, but they will use other tools. OMO (open market operations) sales are one tool that they have spoken of in the latest policy. They have used ICRR (Incremental Cash Reserve Ratio) before; they'll probably do a CRR hike if required, but they have increased the hurdle to increase the repo rate itself.
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What could be the ideal level that RBI may be thinking about for bond yields?
I think 7.50% on the 10-year bond looks like a level where bond yields will be fairly priced. Everybody will be comfortable. We don't think bond yields will go anywhere close to 8%...7.50% is like a Goldilocks level where the RBI and market participants would all be comfortable and foreign investors might find it to be attractive enough for them to come in and invest in India. Even after the JP Morgan Index inclusion announcement, we didn't see investments flow in immediately, though there's a
