We identify a high probability of cut in yields of NSS instruments effective May 01, 2020 on the back of declining weighted average yields in PIB Auction, Apr 15, 2020. This is due to take place in a scenario of drop in yields on PIBs and T-Bills, a step that is tantamount to lowering attractiveness of fixed income instruments.

Our readers would appreciate that all three of these instruments – NSS, PIBs and T-Bills – are touted as alternate investment to equities. A drop in yields of these ‘alternate instruments’ – in a scenario of declining risk-free rate for equities valuations – may make equities markets more attractive relative to these alternate investment avenues. We thus flag PIB Auction, Apr 15, 2020 and its impact on NSS yields effective May 01, 2020 as positive ‘game changers’ for the sentiment at the country’s equities markets. (AHCML | Research)