RBI's cash infusion not enough to cheer market, arrest Rupee's slide

Market News - Bond investors are finding out that the Reserve Bank of India isn’t as generous as they thought.
Sovereign debt declined for a third day Friday, wiping out gains fueled by the RBI’s May 4 decision to inject cash by buying bonds. The measure has failed to revive demand for debt as it simply restores the cash drained by the authority to prop up a sliding Rupee, traders say.

“The RBI could do more OMO purchases because of the run on the rupee,” said Vijay Sharma, executive vice president for fixed-income at PNB Gilts. The liquidity infusion gets “neutralized” when the central bank sells dollars to buy rupees to rein in the currency’s decline, he said. Sharma said he expects the benchmark yield to hold in the 7.60-7.65 per cent range.
Sovereign bonds declined on Friday, with the 10-year yield rising one basis point to 7.73 per cent.

It climbed 15 basis points over three sessions, reversing declines of a similar magnitude that followed the RBI’s OMO announcement.