The Union Budget 2016-2017 has reinforced the credibility and confidence of investors by adhering to the fiscal consolidation path. This is a near-term positive for both debt and forex, says India Ratings and Research (Ind-Ra).
However, Ind-Ra believes that the reinforcement of confidence is necessary but not the sufficient condition for changing underlying fundamentals.
To that effect, we believe five factors are crucial for the DebtFX trajectory which includes, total bond issuances, a proposed committee for reviewing Fiscal Responsibility and Budget Management (FRBM) Act, headroom for monetary easing, a corporate and bank sector recovery, and fiscal arithmetic composition.
Both debt and currency markets are likely to gain owing to improved investor sentiments in the near term. Benchmark 10-year G-sec is likely to stay in the range of 7.58 per cent-7.68 per cent, while the rupee is likely to stay in the range of 67.45-68.15/USD this week.