Reliance Traders said it will have a game plan if RBI hikes rates

Traders at Reliance Industries Ltd’s treasury department are strategizing where to park the company’s cash if the Reserve Bank of India starts raising interest rates in the coming months.

One proposal involves shifting Reliance’s cash holdings from liquid mutual funds to short-dated money market instruments, people familiar with the group’s thinking said.

The switch could pay off as the yield between money-market papers and benchmark rates has risen above its five-year average and is likely to narrow in coming months, resulting in capital gains, the people said, asking not to be named because the information is private. Markets currently expect a rate hike of around 50 basis points this year, they said.

Traders also considered reducing allocations to long-dated bonds, which are more sensitive to interest-rate changes, the people said.

Market expectations were cited in the strategy discussion and the group did not take a clear view on interest rates. Treasury departments typically consider a range of market scenarios when evaluating trading strategies.

“We categorically deny the information contained in your email about our view on interest rates and the behavior of the rupee,” a Reliance spokesperson said via email.

India’s overnight swap shows RBI rate hike

This view carries weight as Reliance runs the largest corporate treasury in India. Discussions also come ahead of the Reserve Bank of India’s rate decision on Friday, where the central bank is expected to announce measures to support the rupee.

While a majority of economists — 29 out of 35 — surveyed by Bloomberg News expect the benchmark rate to remain unchanged, they are taking a hawkish stance to prepare markets for a possible rate hike later this year amid inflationary pressures from the oil price shock.

India’s sovereign bond yields have been broadly flat this quarter even as the rupee has slipped to record lows. The currency has recovered in recent days, helped by RBI intervention and optimism that a US-Iran accord could lead to the reopening of the Strait of Hormuz, a vital route for the country’s energy imports.

The rupee is down 6% this year and recently hit a record low of 97 per dollar. It has been hovering around 95-96 levels in recent days.

Reliance traders expect the rupee to strengthen if a Middle East peace deal is reached and the RBI takes steps to attract capital inflows, one of the people said. They have proposed that the owner of the world’s largest oil-refining complex partially hedge its long-term forward contract positions in the fiscal year starting March 2028, as well as coupon payment arrears, the person said.