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FE NEWS SERVICE
Mumbai, Jan 7: The Reserve Bank of India has mopped up more than Rs 1,400 crore in the first three days of the current week through its open market operations (OMOs). The mop-up has led to marginal tightening of the inter-bank call money rates, dealers said.
The aggressive OMOs by the RBI is on account of renewed bullishness in the gilts market. The exercise will bring down the monetised deficit to a large extent.
With this, the sale through OMOs in this fiscal is nearly Rs 20,000 crore. The sale of the securities this week has been mainly through the 11.78 per cent gilt maturing in 2003, 12.25 per cent gilt maturing in 2008 and the 11.15 per cent gilt maturing in 2002. The price fixed by the RBI is Rs 100.05, Rs 100.15 and Rs 98.55, repectively.
On Wednesday, the RBI sold an estimated Rs 989 crore through the three securities. The 11.78 per cent 2003 sold about Rs 500 crore, the 12.25 per cent 2008 sold Rs 300 crore and the 11.15 per cent 2002 sold Rs 189 crore. On Monday, the RBI sold securities worthRs 196 crore while on Tuesday the central bank sold around Rs 250 crore.
Analysts said that the market players have turned bullish on the liquidity scenario which is likely to lead to bull run in the bond market. Prices of securities firmed up on Wednesday after a South-based bank entered the debt market and bought securities to the tune of Rs 200 crore.
"This has led to slight rise in bond prices and this time the run will be sustained," an analyst at ICICI-Securities Sandipan Deb said.
Dealers said that a similar aggressive mop-up was conducted by the RBI before the advance tax outflows. "This led to a sustained rise in call rates which persisted even after there were fresh inflows," an analyst in a leading brokerage house said.
Market players are aware that the inflow of funds in the next fortnight is concentrated in the first week of the fortnight. Net inflows during the next fortnight is estimated at Rs 1,500 crore and the zero coupon 1999 security will mature on January 18 which will see aninflow of Rs 3000 crore.
Two 364-treasury bills for large amounts will also be redeemed in the coming fortnight.
Another reason for the bullishness can be pointed to the fact the government is unlikely to tap the market in the current fortnight. The government overshot the gross borrowing target last month.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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