RIL buys up to ₹10,000 crore govt bonds as market expects softer yields

According to market participants, RIL may have bought between Rs 7,000 crore and Rs 10,000 crore worth of government bonds during the second week of April

Billionaire Mukesh Ambani’s Reliance Industries (RIL) has made aggressive purchases of government securities from the secondary market in the week after the Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC) slashed the policy repo rate on April 9 and indicated a dovish approach. While the RBI’s stance shift has raised hopes for further rate cuts, RIL also seems to be anticipating further softening of bond yields. 

According to market participants, RIL may have bought between ₹7,000 crore and ₹10,000 crore worth of government bonds during the second week of April. The market expects the yield of the 10-year benchmark government bonds to fall to 6.25 per cent in the coming months. 

“Corporate buying was there, especially Reliance, which is said to have bought ₹7,000 crore to ₹10,000 crore. They bought aggressively on the policy day. After them, private banks were the major buyers,” said a market participant. 

RIL did not reply to a Business Standard email for comment.    

The yield on the 10-year government bond has been trading at multi-year lows, driven by expectations of a deeper rate cut, with two additional cuts anticipated this year. The RBI has also introduced various liquidity measures to facilitate the transmission of these rate cuts, boosting confidence in the domestic debt market. 

“Reliance was active during the week; they bought even on the days before the policy, and after it. The reason could be same — the yield (on benchmark 10-year bond) is expected to fall to 6.25 per cent. Earlier, it was expected June-end, but now it might be sooner too,” said another market participant. 

The MPC had cut the repo rate by 25 basis points (bps) in the last policy meeting, and changed the stance to “accommodative” from “neutral”. Additionally, RBI Governor Sanjay Malhotra mentioned in the post-policy conference that the central bank would ensure surplus liquidity and that an accommodative stance implies either a status quo or a rate cut, prompting traders to anticipate a deeper rate cut by the rate-setting panel. 

“The market is expecting two more rate cuts, and the current supply-demand mismatch due to OMO (open market operations) auctions is driving strong demand for government securities,” said a dealer at a primary dealership. “With supply expected to rise in the second half of the year, investors are looking to book profits while conditions remain favourable,” he added. 

The RBI has infused ₹3.3 trillion via OMO auctions and ₹2.2 trillion via long-term VRR (variable rate repo) auctions.

The net liquidity in the banking system was in a surplus of ₹1 trillion on Sunday, latest RBI data showed.