Daijiworld Media Network - Mumbai
Mumbai, Jun 4: Traders in the treasury division of Reliance Industries Ltd. are reportedly evaluating investment strategies for the company's cash reserves amid growing market expectations that the Reserve Bank of India (RBI) could raise interest rates in the coming months.
According to people familiar with the discussions, one proposal under consideration involves shifting a portion of Reliance's cash holdings from liquid mutual funds into short-term money market instruments.
The strategy is based on expectations that the yield spread between money market securities and the benchmark interest rate, which has widened beyond its five-year average, could narrow in the months ahead. Such a move could potentially generate capital gains for investors holding these instruments.
Sources indicated that treasury officials are also considering reducing exposure to longer-duration bonds, which are generally more sensitive to interest rate increases and could face price pressure if borrowing costs rise.
The discussions reportedly reflect market expectations rather than any formal company view on interest rates. Corporate treasury teams typically assess multiple economic scenarios while managing cash and investment portfolios.
Responding to the reports, a Reliance spokesperson denied suggestions that the company had taken a specific position on future interest rates or the movement of the rupee.
The reported deliberations have attracted attention because Reliance operates one of the largest corporate treasury portfolios in India.
The discussions come ahead of the RBI's monetary policy announcement scheduled for Friday. While a majority of economists expect the central bank to keep benchmark rates unchanged, many believe it could adopt a hawkish tone amid inflationary pressures linked to higher global oil prices.
A recent survey showed that 29 out of 35 economists expect the RBI to leave rates unchanged for now while signalling the possibility of future rate hikes.
Despite rising concerns over inflation and the depreciation of the rupee, India's sovereign bond yields have remained relatively stable during the current quarter.
The rupee, which has declined around 6 per cent against the US dollar this year, recently approached record lows before recovering somewhat due to RBI intervention and optimism surrounding possible diplomatic progress in West Asia.
Market participants are closely monitoring developments related to the Strait of Hormuz, a key route for India's energy imports, amid hopes that any easing of regional tensions could support the rupee and improve economic sentiment.
Sources said Reliance treasury officials expect the rupee to strengthen if a peace agreement is reached in the Middle East and if the RBI introduces measures aimed at attracting foreign capital inflows.
The company's treasury team has also reportedly proposed partially hedging certain long-term forward contracts and future coupon payment obligations due in the financial year beginning March 2028 as part of its broader risk management strategy.
The RBI's policy decision later this week is expected to provide further clues on the interest rate outlook and the central bank's approach to managing inflation, currency volatility and capital flows.