[T.S.R:12245] Repo Markets : How to use?

 

Repo Markets : How to use them? The debt market in India, small relative to its international counterparts, is on the cusp of growth.A robust debt market is among the important steps to complement India's continued strong economic growth.Indian capital markets are a classic case of an 'inverted pyramid' with huge volumes traded in the high risk derivatives segment, followed by equity, and virtually no trading in risk-free instruments. The structure of the Indian capital markets need to change if trillions of dollars have to be allocated to finance infrastructure from high domestic savings and offshore funds. A comprehensive structure of debt markets must comprise of cash market , futures market and a repo market to facilitate hedging and arbitrage activities in addition to generating views on interest rate movements across sectors. We believe that the repo market (market for sale and repurchase agreements) would emerge stronger with increased participation and it would form the basis for development of a broad and strong debt market in India. Please find a note from the Debt market desk of ' Repos: How to use them' with the following: Repos and nature of repo contracts Settlement and margin calls on repo contracts Substitution of securities and types of repos Maturity and rate considerations Users and application of repos Market developements and overview of Indian repo markets Legal and regulatory framework. Repo markets are an integral part of the securities market. Reserve bank of India has permitted repo in treasury bills and governments securities and is in the process of finalizing guidelines for repo in corporate bonds.We believe introduction of repo in corporate bonds will broaden and deepen the activities in debt markets in India.

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