Bond prices plunge

The bond market continued to reel under the after-effects of the new turnover tax. The prices of select government securities fell by around...

The bond market continued to reel under the after-effects of the new turnover tax. The prices of select government securities fell by around 40 to 60 paise in a lacklustre market.

Volumes at the National Stock Exchange’s (NSE) wholesale debt market segment at Rs 1,168 crore were almost one-third of the volume registered on the pre-Budget day when it touched Rs 3390.83 crore.

Yields on the benchmark 10-year bonds shot up to 5.87 per cent from 5.79 per cent on Saturday, with the price of the 7.37 per cent 2014 stock ending 53 paise lower at Rs 111.12/16.

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Most players preferred to stay away of the market ahead of a dealers’ meet with FM on the tax issue. When the turnover tax comes into force, dealer margin will be wiped out after the payment of the tax.

The inflation for the week ended June 26 was at 6.09 per cent, the highest ever in this fiscal, and is likely to be over 6 per cent mark. ‘‘The market lacks focus,’’ a dealer said, adding that no player was in a position to take a view.

“Various associations are trying to have a dialogue with Chidambaram and see how the turnover tax matter can be resolved,’’ said a dealer.

Dealers are demanding that the turnover tax on bonds and Gilts should be removed or brought down steeply. The finance ministry has clarified that trades done through RBI’s Negotiated Dealing System (NDS) will be exempt from trade.

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Meanwhile, RBI has announced the sale of 4.83 per cent 2006 paper for Rs 5,000 crore under the market stabilisation scheme. The sale will be conducted on Wednesday.