Market Round-Up
Call MoneyCall rates continued to rule high for the second consecutive day today following heavy demand from commercial banks. The market opened in the range of 40-50 per cent on overnight shortcovering. During mid-trading session, they dropped to 25-40 per cent, but shot up at the end of the trading following squaring up activity. They closed the day in the range of 40-50 per cent. The call market is still reeling from the RBI measures announced last week, including hiking of cash reserve ratio and bank rate, dealers said.Due to an increase in the CRR, which pushed up the interest rates, the yields in the secondary market for gilts were affected, declining by 50 paise, they added. The Mumbai interbank overnight average was 34.26 per cent at close on Tuesday. Forecast: Tight money conditions are likely to continue. Spot Dollar The spot rupee turned volatile on Tuesday. Opening at 39.08/18 against the dollar, the Indian unit gained ground as exporters started to sell their dollar
holdings in the morning session. The rupee rallied to trade at 38.65 on Tuesday, but subsequently, dollar-buying by importers saw it weaken against the dollar. It finally closed at the opening levels -- 39.08/18. On Monday, the rupee had closed at 38.95/39.02. "Importers came in a big way as they thought it to be a good level to buy," a chief dealer in a private bank said. The Reserve Bank of India did not intervene in the market, but dealers said that the apex bank made enquiries when the rupee was weakening. Dealers said that the rupee will continue to remain volatile for some time as the market is still feeling the impact of the RBI tight money measures. FORECAST: Spot rupee is expected to rule between 38.80 and 39.20 Forward Premia Forwards went haywire as call rates continued to rule high. The forwards moved in tandem with the spot rupee on Tuesday, dealers said. The six-month forwards, which were ruling at 16.25 per cent (annualised) on Monday, rose to touch 18 per cent on Wednesday.
January premia continued to remain high and touched 57 per cent (annualised). One-year premia also rose to 16 per cent-up by 300 basis points on a single day. "The nervousness in the spot market has now spilled over to the forward market," a treasury head said. Money market rates, which continue to rule high at 40-45 per cent levels, have had an effect on the forwards. "It is more sentiment driven," a dealer said. FORECAST: Forwards will continue to rule at these levels and six-month forwards may touch 20 per cent on Wednesday. Gilts The debt market, which showed signs of strengthening during early trades, fell again towards noon after call rates tightened. "There were a lot of sellers in T-bills during the day," said a dealer with a private sector bank. "It was largely a sellers' market today with lots of players getting out of the positions that they had taken," said a dealer with a public sector bank. The wholesale debt market segment of the National Stock Exchange witnessed trades worth
Rs 817.29 crore on Tuesday. The 12.14 per cent 2000 government loan was traded for Rs 45 crore at a weighted yield of 12.73 per cent. The 364-days treasury bill maturing on April 10, 1998 was traded for Rs 108 crore at a weighted yield of 16.29 per cent. Repo deals worth Rs 150 crore were traded on Tuesday. FORECAST: Yields expected to further rise.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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