As the end of the month approaches, rupee demand from domestic oil companies tends to make trades lower, but that has not been the case this month.
“When there is such demand, the rupee tends to trade lower, but that was not the case today as we have the index covered this weekend. In anticipation of that, the market drives investment flows and adjusts prices”, said Dilip Parmar, technical analyst at HDFC Securities.
The benchmark 10-year government bond also traded flat, with the yield closing at 6.98% on Tuesday, up just one basis point from the last close.
The yield touched a mid-day low of 6.95% to 6.96%, but rebounded as the day progressed.
“The inclusion of the index is supporting the market, but today and yesterday the market gave up a lot of its gains, as the expectation is that whatever flow is going to come, a lot of it has come and hence the market may be a bit disappointed. When the actual inclusion is there”, said a trader at a primary dealership.
Liquidity Rs. There has been a tight deficit of more than. 1.6 lakh crore, but markets expect liquidity to ease when the government starts spending from next month.
“Yes, there is a liquidity crunch and RBI is not auctioning enough VRRs. All PSU banks which are regular lenders, do not lend easily”, traders said.
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