Indian bonds rally on hopes of global easing, good monsoon

The Indian government bonds rally on Thursday as investors were cautious amid expectation that major global central banks would provide monetary stimulus to offset the impact on growth from Britain’s decision to leave the European Union.

Also, as a revival in monsoon rains eased concerns that food inflation is set to bounce in a nation that has suffered two consecutive years of drought, rising possibilities for further monetary easing from the Reserve Bank of India (RBI).

The yield on the benchmark 10-year bonds, which moves inversely to its price fell more than 2 basis points to 7.373 percent, the yield on short-long 3-year bonds dipped 3-1/2 basis point to 7.036 percent and the yield on super-long 30-year bonds slid 3 basis point to 7.683 percent and the by 07:00 GMT.

Moreover, the minutes from the 14 – 15 June FOMC meeting indicated the Fed is unlikely to resume raising rates in the near-future and likely to delay action until later in the year (or possibly 2017) due to on labour market concerns and Brexit fears.

In addition, the India Meteorological Department (IMD) in its latest report concluded that the Southwest monsoon rainfall has shown a marginal rise of 1 percent with a good amount of precipitation in several parts of the country for the period between June 1 and July 6. The surge in showers during the first six days of the month resulted in lowering of this deficiency. Last Saturday and Sunday happened to be the two wettest days of the year so far.

Lastly, investors will remain keen to focus on the retail inflation data due on July 12. We foresee that June retail inflation will increase 6.2 percent from 5.8 percent in May.

Meanwhile, the Sensex rose 0.27 percent or 72.55 points to 27,239.42 and Nifty-50 futures trading 0.37 percent higher or 29 points at 8,381 by 07:30 GMT.