The overnight rates ruled easy on Tuesday. The rates opened at 5.50 to 5.75 per cent compared with their previous close of 5.75 to six per cent. The rates closed at the opening level.

The rates ruled easy owing to slack demand for funds as most borrowers were not present in the call money market. "There is a lot of liquidity in the system and banks flushed with funds have no avenues to deploy it," money market dealers said. In spite of the excess liquidity in the system, the call money market did not receive any application for the three-day fixed-rate repos which indicates that banks are not interested in lending in the market.

The Securities Trading Corporation of India turnover was Rs 1,900 crore on a weighted average rate of 5.27 per cent. The Discount and Finance House of India extended market support of over Rs 1,600 crore.

FORECAST: The call rates are seen at five to 6.50 per cent on Wednesday.

Spot Dollar

The spot rupee fell by nearly 20 paise on Tuesdayafter the yen touched a low of 147.60 against the dollar.

According to dealers, there was panic buying throughout the day by corpo-rates.

"Importers are covering unnecessarily now. But I guess they are not quite sure about the political situation also," a dealer in a private bank said.

After opening at 42.69, the rupee slid and, despite SBI's presence, touched an intra-day low of 42.90. The Indian currency finally closed at 42.86/88.

"I am not very sure whether deals were conducted at 42.90," a dealer in a public sector bank said.

FORECAST: The rupee may test the 43 barrier on Wednesday, bankers said.

Forward Premiums

The forward rupee tracked the spot rupee on Tuesday as corporates continued to pay and there was hardly any receiving by exporters.

"Importers are covering although we are advising them to wait," a dealer in a private bank said.

"The premiums rose across the board by 10 to 15 paise on Wednesday," a dealer said. The rupee weakened in the non-delivery forward (NDF)segment. The six-month forward rupee quoted at 45.60/45.90 while the one-year one was pegged at 48.20/50. The one-month annualised premium closed at 6 per cent (4.6 per cent) and three-month one at 7.5 per cent (6.5 per cent).

The six-month annualised forward cover closed at 8.5 per cent (7.75 per cent) and the one-year one at 9 per cent (8.7 per cent).

FORECAST: The six-month annualised forward cover is seen at 9-10 per cent on Wednesday.

Gilts

The government securities prices appreciated by 5 to 10 paise on Tuesday morning. However, in the afternoon, they fell following depreciation in the rupee value and hectic covering by importers in the forex market.

According to dealers, prices of short-term securities appreciated and saw keen buying interest. But in the afternoon, sentiments changed and most banks were seen selling securities at lower prices.

The wholesale debt market of the NSE witnessed increased activity worth Rs 867.73 crore. The 11.55 per cent government loan maturingin 2001 was traded worth Rs 147 crore at a weighted yield of 11.37 per cent.

The 11.68 per cent government loan maturing in 2002 was traded worth Rs 127 crore at a weighted yield of 11.55 per cent.

FORECAST: Prices in the short-dated government securities are expected to show a downward trend on Wednesday.