Monetary Policy View (April,2021) by Lakshmi Iyer, CIO (Debt) & Head Products, Kotak Mutual Fund

“The RBI MPC voted for a status quo in line with our and market expectations. The move to introduce G-SAP – secondary market GSec acquisition program is a master stroke by the RBI. This would reign in sharp spike in GSec bond yields. Introduction of long term VRRR (variable rate reverse repo) is an extension towards normalising liquidity. Liquidity surplus however will and is likely continue. We expect yield curve to flatten from the current levels with the longer end of the yield curve compressing faster than the short end.”