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Informist, Friday, Nov. 28, 2025

MUMBAI – On Saturday, the two-day call money rate may open below the Reserve Bank of India's repo rate due to around INR 650 billion of inflows from the release of funds from the last phase of the cut in the cash reserve ratio. The cash reserve ratio will be reduced by 25 basis points Saturday, to 3.00%. This is the fourth and final stage of the staggered cut in the cash reserve ratio that RBI Governor Sanjay Malhotra had announced at the June Monetary Policy Committee meeting outcome. Inflows from the central government's month-end expenditure may also aid the systemic liquidity surplus. Volumes may be low, as is usual on Saturdays. Government bonds and overnight indexed swap rates are not traded on Saturday.

"I don't think there will be much demand for funds tomorrow (Saturday), some demand may be there from banks for month-end disbursements," a dealer at a private sector bank said. "...The liquidity will anyway improve because of CRR (cut) as well." 

During the day, the two-day call money rate is seen in a range of 4.85-5.45%, dealers said. On Monday, the RBI will conduct a four-day variable rate reverse repo auction of INR 750 billion 0930-1000 IST. The three-day call rate ended at 5.50% Friday.

GOVERNMENT BONDS

Traders have mixed views on market open Monday. Some said bond prices will fall further as traders digest India's GDP growth print for Jul-Sept, which was released near the end of trade Friday. However, the rise in the 10-year 6.33%, 2035 bond yield is seen capped at 6.55-6.56%. Some traders expect bond prices to open higher, since the fall in prices Friday was too sharp. Going into the policy decision end of next week, bond prices may rise on optimism of a rate cut, especially since nominal GDP is lower than the budgeted estimate, dealers said. Hopes of an announcement of an open market calendar to purchase gilts through auction are also gaining momentum, and traders now hope for OMOs in the range of INR 2.00 trillion to INR 3.00 trillion from INR 1.50 trillion earlier. Traders also expect the central bank to downgrade its CPI forecasts, due to the Centre's recent cut in goods and services tax, and a near-zero inflation print in October. 

On the flip side, bond prices may open lower after the RBI post market hours said 13 states will raise INR 313.50 billion through bond sale Tuesday, higher than INR 210.00 billion indicated in states' borrowing calendar for Oct-Dec. Further, fresh supply of INR 320 billion of a 10-year bond on Dec. 5, the same day as the policy outcome, may weigh on risk appetite, dealers said. 

Traders may also track global cues as traders in the US return to their desks after the Thanksgiving holiday weekend. The lack of an announcement of an India-US trade deal so far may increase bets of a rate cut next week, dealers said. Several traders were expecting a deal by the end of the month. The RBI's rate-setting panel, at its policy meeting in October, had flagged concerns of risks to economic growth due to trade tariffs.

Traders will also look out for bond purchases of around INR 120 billion from the Deposit Insurance and Credit Guarantee Corp., a wholly owned subsidiary of the RBI. The institution likely bid for the seven-year gilt at Friday's auction. The RBI arm insures bank deposits up to INR 500,000, and the premium for the first half of the financial year will be paid by the last working day of November. The institution usually invests this premium in gilts, especially in the 10-year and 15-year segments. 

Movement of crude oil prices may also influence gilts. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.45-6.55% Monday. The yield on the 6.33%, 2035 bond is seen at 6.50-6.60%. The 6.48%, 2035 gilt ended at INR 99.80, or 6.51% yield, while the 6.33%, 2035 bond ended at INR 98.49, or 6.55% yield, Friday.

OIS RATES

Swap rates may inch higher Monday as traders position for the MPC's three-day meeting starting Wednesday after the higher-than-expected GDP growth, dealers said. Volumes may be significant on Monday and Tuesday but fall in the rest of the week as the six-member panel deliberates the interest rate trajectory. Most traders now expect a pause in rates next week, after betting on a 25-basis-point cut before the GDP data.

Traders will also track geopolitical developments, especially those related to the India-US trade deal. Most traders expect more clarity on this front by the month-end. With no recent developments, dealers said a continued 50% tariff on India's exports to the US may also prompt the RBI to ease monetary policy.

The rupee's movement against the dollar is also closely tracked, as some traders fear the MPC may avoid cutting rates in the face of the rupee's recent weakness. The domestic currency hit a record low of 89.4950 a dollar last week and approached it again this week.

Traders will also track the overnight Mumbai Interbank Outright Rate and crude oil prices for cues, dealers said. The one-year swap rate is seen at 5.38-5.50% and the five-year rate is seen at 5.66-5.75%. On Friday, the one-year rate ended at 5.46% and the five-year rate ended at 5.76%.

RBI AUCTION

--Nil

LIQUIDITY

Total net inflows of INR 8.75 billion. The calculation of flows does not take into account redemption of the standing deposit facility and scheduled variable rate repo and variable rate reverse repo operations.

* Inflows

--INR 8.75 billion as coupon on state bonds

* Outflows

--Nil

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Cassandra Carvalho

Edited by Deepshikha Bhardwaj

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