The interbank call rate moved in a narrow range of 5 per cent to 6 per cent on Monday, dealers said. The call rate opened at 5.5-6.0 per cent and closed at 5 per cent to 6 per cent, they said.

The rate remained steady despite the outflow of roughly Rs 3,000 crore towards state government loans on Monday. The market witnessed good liquidity and the call rates are expected to ease further on Tuesday.

Most dealers expect the call rate to move in a 4.0-5.5 per cent range on Tuesday. ``The rates are easing,'' said a dealer at a private-owned bank.

The rates did not ease from the opening level on Monday because banks preferred to buy government securities as they expect a cut in interest rates in the forthcoming credit policy of the RBI, due for announcement in the third week of October.

FORECAST: Call rate seen in a narrow band of 4.0-5.5 per cent on Tuesday.

Spot Dollar

The rupee moved in a narrow range of 36.1650-36.1850 to a dollar on Monday. Opening at 36.1650-36.1750 per dollar, the rupee weakened marginally to 36.18 to a dollar after a few corporates bought the US currency, dealers said.

There were also talks that the Reserve Bank of India entered the market towards the end of the trading session and purchased the greenback.

But this could not be confirmed as the dollar only gained marginally to Rs 36.1850 around closing. It closed at Rs 36.1750-36.1850.

``The RBI purchased around $10-$20 million near the close of trading hours,'' said a dealer at a state-owned bank. But this was denied by another dealer at a private-owned bank.

The market also witnessed some trading activity on Monday, he said. ``Barring a few stray demands from corporates, the market was largely quiet,'' he added.

FORECAST: Rupee seen in a similar band on Tuesday.

Forwrd Premia

Premiums on the dollar for forward deliveries eased from the opening levels as exporters sold fearing a fall in premiums, dealers said on Monday.

Six-month dollar deliveries opened at 5.14 per cent over the spot rate and closed at 5.03 per cent, they said. On Friday, the premium (six months) closed at 5.2 per cent.

Dealers said there was hardly any paying (of premiums) pressure seen on Monday because importers are expecting the RBI to cut interest rates which will ease the forward premiums further.

The importers are expecting a cut in bank rate this month end when the RBI announces the busy season credit policy (for September 1997-March 1998).The premiums are expected to fall below the five per cent levels on Tuesday, a dealer at a brokerage said.Corporates, mainly importers, also stayed away from the market, while a few exporters sold forward deliveries, dealers said.

FORECAST: Premiums expected to dip further on Tuesday, six-month dollar premiums may fall below 5 per cent.

Gilts

Activity in the government securities market on Monday remained largely restricted to short- and medium-term securities, dealers said.Trades at the NSE totalled Rs 256.58 crore. Prices of a few securities moved in a narrow range, while in most bonds, prices maintained a steady trend.

A few banks were also said to be taking trading positions in government bonds as they expect the interest rates to fall when the RBI announces its credit policy. The RBI will announce the policy in the third week of this month.

A fall in interest rates will align the existing bond yields with the new rates and boost bond prices. Among the securities actively traded were the 12.5 per cent, 2004 (traded volumes Rs 50 crore); the 12.59-per cent, 2004 (Rs 40 crore); the 13.05-per cent, 2007 (Rs 20 crore); the 11.19-per cent, 2005 (Rs 15 crore); the 12.14-per cent and 6.50-per cent, both maturing in 2000 (Rs 10 crore each).

FORECAST: Activity seen restricted to near and medium-term bonds.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.