New boss on Mint Street should soothe bond and currency markets: Lakshmi Iyer, Kotak Mutual Fund

Maintaining RBI independence and alongside trying to create continuity in current measures are the two things market is looking forward to, Lakshmi Iyer, CIO-Fixed Income & Head-Products, Kotak Mutual Fund, tells ET Now.

Edited excerpts:


There’s a new boss at Mint Street. Do you think that the new appointment will offer the kind of calm that the markets were seeking yesterday, especially the currency markets?

It should at least try to stabilise the market which had displayed a knee-jerk reaction yesterday. While yesterday also was on anticipated lines, my sense is this should bring in a little bit of soothing news to the bond markets and to a lesser extent to the currency markets. but certainly there is hope of stability.


What would you expect Mr Shaktikanta Das to bring on the table in the near term, medium term and in the run up to the general elections that can help improve the botched image of the relationship between the central bank and the central government?

There were a couple of things which the markets were keenly looking at, specifically investors. The foreign investors are looking at what kind of communication is forthcoming from the central banker. So. market participants will be waiting for a)how much and what guidance comes in from the central bank and b) how the government and the central banking work together. This is not really considered being hand in glove with the government but certainly maintaining its independence and alongside trying to create continuity in the current measures. A combination of these two things is what the markets will be looking forward to and there is clearly hope on those fronts.

A lot of OMOs are expected in the Jan to March period. Does that continue? Do you also see abundance of OMOs in that period? What is your view given the kind of changes that we have seen on the political, macro and consequently micro front?

Firstly on the OMOs, we were guided even in the recent monetary policy post decision that for liquidity it is important that open market bond purchases continue and looking at the liquidity scenario at the current juncture, we clearly believe that there is a case for continuing these OMO bond purchases well into the coming quarter, which is for January, February and March. It may not be abundant but I think it is certainly needed to be adequate.

On the second count, from an India story perspective, let us not forget that we still offer one of the highest real rates in the world and given that we have a favourable macro which is acting as a strong tailwind for us, the markets would be willing to ignore the momentary disruptions and the sooner you are able to weed out these anomalies, the better. Markets will clearly reward that and we have seen that in the bond markets opening where the markets seem to have given a thumbs up to this decision.