Call rates eased slightly on Monday to below the Reserve Bank of India (RBI) fixed rate repos floor of nine per cent. The call rates, which opened at around 9-9.25 per cent, dropped to around 8.5 per cent towards the end of the trading on account of limited demand from borrowers and the resultant easy liquidity. There were also some stray deals at below 8.5 per cent after the clearing hours, dealers said.Most of the day's deals were struck in the range of 9-9.25 per cent, dealers said. According to them, the liquidity in the system increased due to inflows of around Rs 1,735 crore on account of last week's fixed rate repos conducted by the RBI and interest coupon payments, while corresponding demand for funds was scaled, pushing down call rates to below the RBI fixed rate repos floor of nine per cent. STCI's weighted average call money reference rate was 8.90 per cent.
FORECAST: The rates are likely to move in narrow range, with squarish tendency.
Spot Dollar
The rupee weakenedconsiderably to breach the psychologically-significant 39 mark to close at 39.26, a month after the rupee touched 39, dealers said.
Opening at 38.97/99, the rupee lost ground immediately on inter-bank trades to trade at 39.05. "Once it crossed 39 it just went down, which prompted the Reserve Bank to intervene and sell dollars," a chief dealer with a private sector bank said. After the Reserve Bank intervention, the rupee gained ground to trade at 39.12, but once again dollar-buying by the foreign banks saw the rupee close at 39.26. State Bank of India was buying dollars on behalf of its corporate clients, which saw other banks, mainly the foreign ones, start buying dollars to sell to the State Bank, which saw the rupee weaken considerably.
FORECAST: Dealers said that the rupee is likely to weaken further on month-end scramble for corporate cover.
Forward Premiums
Forward differences continued to move up during the day, but State Bank of India received dollars, which saw premiums comingdown marginally during the day. Dealers said State Bank intervened on behalf of the Reserve Bank to receive dollars to bring down premiums.
"The far forwards like the six- and one-year forwards reacted by coming down marginally," a dealer with a private-sector bank said. "State Bank generally pays when it buys spot dollars in the market, but today it seems they received dollars on RBI's behalf," a chief dealer with a public sector bank said. Six-month premiums fell to 308 paise after touching a high of 316/318 paise. The annualised premiums was 16.8 per cent. According to dealers, exporters are still staying away from the market as they are still uncertain about interest rate movement.
FORECAST: Forwards are expected to rise as importers are still scrambling for cover.
Gilts
The government securities market witnessed dull trading with selling pressure across all maturities but no firm buyers. "The market was lacklustre and hardly any trading took place due to the absence of firm buyorders," a dealer said.
The wholesale debt market segment of the NSE witnessed trades worth only Rs 188.09 crore. The 12.50 per cent government loan maturing in 2004 was traded for Rs 5 crore at a yield of 12.12 per cent. The 10.85 per cent government loan maturing in 2001 was traded for Rs 5 crore at a yield of 12.194 per cent. The 364-days treasury bill maturing on April 24, 1998, was traded for Rs 32 crore at a weighted yield of 12.94 per cent. Repo trades worth Rs 120 crore were transacted. The central bank also mopped up Rs 1,075 crore from the system through repos on Monday through its three-day repo auction held at a fixed rate of nine per cent.
FORECAST: The gilts market is not likely to witness much activity on Tuesday.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
