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No signs of volatility abating: HDFC Mutual

Our Bureau

COIMBATORE, May 1

HDFC Mutual Fund hopes that in the coming months, the liquidity position would be comfortable and the rupee would remain stable. It also expects the interest rate to soften gradually during this period.

However, the equity market would continue to witness uncertainty and ``volatility may remain the order of the day'', the fund has stated in its latest news letter.

Adverting to the debt market segment, it said the 1.5 per cent interest rate cut in the small savings would go a long way in reducing structural rigidities in interest rates in the country.

It would also impart greater flexibility to banks to decide on deposit rates and base them on economic considerations.

The fund said the recent negative sentiments in the market had drawn the attention away from certain positive developments. With no fresh inflationary inputs from the Budget, inflation was expected to drop further in the coming months due to the base eff ect.

In the first few months of the current fiscal (2001-02), it was expected that the liquidity position would be comfortable and the rupee would be stable given the fact that the forex reserves were close to $40 billion.

The external environment was also conducive to lower interest rates with the US interest rates turning soft and oil prices under check.

The fund noted that despite the substantial supply of paper expected in the first half of the year mainly due to Government borrowings, the interest rates might soften gradually over the period and spreads of non-Government debt over the Government debt might go down further.

On the equity market, the fund, referring to the recent negative developments said: ``Sadly, opposition to privatisation will take on a new life and it is unlikely that big-ticket PSUs such as Air India will easily cross the privatisation hurdle this yea r.''

While the US market is grappling with an economic slowdown and the first bear market after more than a decade, the Indian market remained skittish expecting further negative news at every turn.

In such circumstances, ``uncertainty will continue to reign supreme and volatility may remain the order of the day,'' the fund noted.

Mr Milind Barve, Managing Director, HDFC Mutual Fund, said the fund had planned to add more investor service centres (ISCs) to its existing 22 ISCs for the benefit of the investors.