India's cash deficit to worsen: JP Morgan

J.P.Morgan says India's liquidity deficit to worsen, hitting 1.5 lakh crore in June, as government spending remains tepid.

Core liquidity deficit could hit 1 lakh crore by the end of June, bank says.

The deficit would only come down if there are more cuts in the cash reserve ratio or more open market operations, J.P.Morgan argues.

The RBI needs to purchase Rs 35,000 crore in bonds via OMOs by June if they want to bring down core liquidity deficit to their comfort band, J.P.Morgan says.

Recommends investors continue to receive 5-year OIS as weak rupee likely to induce greater intervention by the RBI, and thus sterilisation via OMOs, which will push down bond yields.