Tax Outflows Likely To Pull Down Gilts

Government security prices are likely remain under pressure this week because of advance tax outflows. Dealers are expecting a gradual fall in prices during the week amidst cautious trade.

A primary dealer said: "The Reserve Bank of India (RBI) has already indicated that it is not comfortable with high government security prices. That apart, with advance tax outflows hitting the system there will be a bit of selling in the gilts market."

Dealers, however, are not expecting a sharp fall as there will be inflows on account of foreign currency inflows and RBI mopping up most part of it.

A dealer with a private sector bank said: "This will provide some breathing space. Moreover, the RBI will also not let the prices to go down much. It will continue to go with its easy monetary policy on the back of economic recession. Hence, we do not expect a sharp fall in prices."

The government securities market was stable on Saturday as dealers kept a close watch on the political development after the terrorist attack on parliament.

According to dealers, this factor will continue to have an impact on the market this week.