CALL

The interbank call rate on Friday crashed to 1.0-2.0 per cent in a one-sided market that was flush with funds, dealers said.

The ample liquidity was attributed to the poor demand for overnight funds, they said. The call rate opened at 8-9 per cent and soon began declining due to lack of borrowing interest, they said. ``Most banks had already covered their requirements ahead of the reporting day, Friday,'' a dealer at a private-owned bank said. Though banks are now freed from maintaining the 10-per cent cash reserves with the Reserve Bank of India on interbank borrowings, banks preferred not to borrow, a dealer at a state-owned bank said.

``Except for a few stray deals at the opening levels, most banks were comfortable as they covered their requirement on Thursday itself,'' said a dealer at a trading house. A few banks also raised funds through three-day repo deals at 5-7 per cent, dealers said. The call rate is expected to move in a narrow band of 5-7 per cent on Saturday.

FOREX

The rupee gained against the US currency on Friday after the State Bank of India entered the market late noon and sold dollars, dealers said.

Opening at 35.86-35.87 to a dollar, the rupee ended firmer at 35.8375-35.8425 in a one-way market that witnessed only selling (dollars) by one large bank, dealers said. The rupee ended on Wednesday at 35.8725 to a dollar. On Thursday, banks in Mumbai were closed for a holiday. There was no intervention by the Reserve Bank of India on Friday, dealers said. The market expects the rupee to strengthen further on Monday if there is no intervention by the RBI, they said.

``The market is flush with dollars and exporters are waiting to offload them on every rise thereby capping the rupee from depreciating,'' a dealer at a private-owned bank said. Importers on the otherhand are waiting for a softer dollar, he said adding that the RBI will not let the dollar depreciate below Rs 35.80.

State Bank's dollar-selling on Friday was largely on behalf of its clients, dealers said.

FORWARD PREMIA

Premiums on the forward marginally declined from their opening levels in dull trading, dealers said. Six-month dollar premiums were down by a mere 0.05 basis points from Wednesday's closing level of 4.90 per cent, they said.

The lullness was attributed to the decline in the domestic interest rates which were as low as 1 per cent today.

The rise in the domestic overnight (call) interest rates earlier this week saw some activity in the forward dollar markets as banks swapped cash for dollars to meet their rupee requirements. The domestic call rates touched a high of 10.5 per cent and banks found swaps cheaper rather than raising money in call.

Barring a few deals, importers as well as exporters preferred to stay away from the market. ``They have adopted a wait and watch policy,'' a dealer at a brokerage said. The premiums remained largely stagnant for most part of the day. The slight easing was witnessed just before close, a dealer at a private-owned bank said. SBI was a very passive player today, dealers said. There was no intervention by the RBI to support the sagging premiums, dealer said. GILTS

The securities market remained inactive as banks focussed their attention on the five-year bond auction held by the Reserve Bank of India today.

The uncertainty whether the Rs 3,000-crore issue will be fully subscribed led to many banks staying away from the secondary securities market, dealers said.

The RBI accepted bids totalling only Rs 2,013.02 crore, the balance Rs 986.98 crore, devolved on the RBI and the primary market dealers. The coupon on the five-year bonds was awarded at 12.69 per cent. The amount the RBI received at the bond auction totalled Rs 3,766.63 crore. At the weekly, 91-day treasury bills auction held today, the RBI maintained the cut-off yield at last week's level of 6.23 per cent. The Rs 150-crore issue faced a devolvement of Rs 45 crore. The RBI rejected all the three bids it received at the four-day repo auction of government securities held today. The amount rejected totalled Rs 2,000 crore. The amount rejected by the RBI at today's auctions will have a dampening effect on the call rates and improve trading interest in the government securities market, dealers said.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.