The Reserve Bank is likely to conduct open market operations (OMO) purchase worth Rs 1 trillion in the current financial year, says a report.
On Tuesday, the central bank had announced a Rs 1,000 -crore OMO , where it is buying five government securities.
"For the full fiscal year, we still expect Rs 1 trillion in OMO buybacks, but these should be concentrated in the second half with a series of OMOs starting in the second half of September," Nomura said in a note today.
It said advance tax outflows in the second half of June is pushing banking system liquidity into deficit which stood at Rs 12,800 crore as of June 18.
The total system liquidity (banking system liquidity plus the cash surplus with the government was Rs 10,700 crore deficit as of June 8) is already in deficit.
"Against a backdrop in which banking system liquidity is contracting due to tax outflows while the RBI is maintaining a neutral stance and preferring to keep the overnight rates closer to repo rate, the infusion of liquidity is unsurprising," the report said.
Given that currency in circulation typically returns to the banking system in July and August and the RBI's dividend payout to the government also adds to system liquidity in August, the report expects OMOs to be intermittent over the first half of the fiscal year, with one more OMO towards end-July likely.
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