Government bonds continued to be under pressure on Monday after a crucial economic review meeting by Prime Minister Narendra Modi over the weekend failed to bolster market sentiment over rapidly falling rupee, and left investors disappointed as analysts say measures fell short of expectations.
The 10-year government bonds slumped further on Monday, with the yields on this paper rising to 8.15%. The rupee depreciated sharply, falling 83 paise to a low of 72.6875 against the US dollar, data from Bloomberg showed.
“Overall, the market is disappointed with the steps unveiled by the government and we feel we may see levels of 74 (for the rupee) soon,” said Bhavik Patel, Senior Technical Analyst, Tradebulls Securities. “Market clearly is not impressed by government’s talks of reducing current account deficit and exemption from withholding tax on masala bonds issued in 2018-19. Increase in limit for FPI to invest more in corporate bonds also is not the steps market was looking for,” he added.
Amid a weak rupee and rising bond yields, the domestic equity markets plunged into the negative territory, with banking and financial stocks taking a hit. The Sensex fell 493 points to hit an intra-day low of 37,597.05 points. The NSE Nifty 50 index slipped below the 11,400-level to scale xan intra-day low of 11,373.90 points.
The Narendra Modi-led government on Friday announced various measures to control current account deficit and shore up the rupee. In another internal meeting held on Saturday, the Prime Minister took stock of the broad parameters of the economy, and analysed the positions with regard to tax collections, capital expenditure and fiscal deficit targets. Detailed presentations were made by the Department of Economic Affairs, the Department of Revenue, Department of Expenditure as well as DIPAM.