The Aryavarth Express
New Delhi: The Reserve Bank of India (RBI) is expected to infuse liquidity worth ₹1.5–2.5 lakh crore during the first quarter of calendar year 2026 (January–March) through open market operations (OMOs), according to a report by HSBC Asset Management.
The report added that the central bank could undertake additional OMOs amounting to ₹2–3 lakh crore during the remainder of 2026. The scale of these operations will largely depend on changes in the RBI’s foreign exchange reserves and balance sheet dynamics.
HSBC noted that such liquidity injections would improve demand–supply conditions in the government bond market, providing support to central government securities.
A key positive trigger for bonds could be confirmation of India’s inclusion in the Bloomberg Global Aggregate Index in Q1 2026. If included, India could see foreign portfolio investor (FPI) inflows of USD 15–20 billion, significantly strengthening the technical outlook for government securities.
On the macroeconomic front, the report said conditions remain supportive of keeping interest rates steady and relatively low for an extended period. However, risks persist due to uncertainties in the global environment and external sector developments.
As the monetary easing cycle nears its end, HSBC expects fixed-income markets to enter a phase of consolidation, marked by wider trading ranges and increased volatility, as investors begin focusing on the timing of a potential policy reversal.
The report also flagged the rupee as a key concern. Managing the currency in 2025 has been challenging for the RBI amid rising dollar demand, a widening trade deficit, and capital outflows, all of which have weighed on the rupee.
An early trade agreement with the United States could offer some relief by improving India’s export competitiveness. Historically, the rupee has experienced sharp depreciations every two to three years, often triggered by global shocks, followed by periods of stabilisation aligned with domestic fundamentals.
While the exact peak of the current depreciation cycle is difficult to predict, HSBC believes India is nearing the end of this phase, with the rupee likely to stabilise within a narrower range through the rest of 2026.
