The overnight call money rates opened at 5.5-6 per cent on Wednesday as the market expected a 2 per cent cash-reserve ratio (CRR) cut. However, after the credit policy announcement, which disappointed the market, the call rates fell to 4-5 per cent to finally close at 4-4.5 per cent, said market dealers.

The call rates ruled easy as the market witnessed dull conditions owing to ample liquidity.

According to dealers, as no repos were announced on Wednesday, the entire liquidity in the market was utilised for transactions. Hence, the rates eased further to close at 4-4.5 per cent. The Securities and Trading Corporation of India (STCI) recorded a weighted average of 4.60 per cent on a total turnover of Rs 1,400 crore. Meanwhile, the Discount and Finance House of India (DFHI) extended a market support of Rs 1,200 crore.

FORECAST: The call rates are expected to hover at the same level on Thursday.

Spot Dollar

The rupee opened at 39.73/74 on Wednesday, weaker than itsprevious opening of 39.70/71.

It stayed firm for most part of the day and most deals were struck at 39.73/74, dealers said.

The State Bank of India (SBI), which bought dollars for its public sector clients on Monday, was missing on Wednesday, dealers said.

"There was no month-end demand for the greenback and the market was very lacklustre.

There was hardly any movement in the spot market," a dealer said. The dollar's high for the day was 39.74 while its low was 39.73. Most deals were struck at 39.73/74 and it closed at 39.73.50 on Wednesday, unchanged from its previous close.

"The announcement of the credit policy had no impact on the spot rupee," a dealer in a private bank said.

FORECAST: The rupee is likely to be stable on Thursday.

Forward Premiums

Forward premiums were volatile in the inter-bank forex market on Wednesday as the market reacted to the slack season credit policy. "The premiums opened three-four paise lower than Monday's level in anticipation of the creditpolicy. After the announcement, the market was a little disappointed and as a result the premiums went up by 7-8 paise," a dealer in a private bank said.

However, after the Reserve Bank of India cut the repo rate to 6 per cent, premiums fell by 4-5 paise. The six-month annualised forward cover ended at 6.90 per cent, up marginally from 6.8 per cent on Monday. Premiums went up on some receiving pressure, but came down towards the end of the day," a dealer in a private bank said.

One-year forwards closed at 7.4 per cent while the one-month ones closed at 3.75 per cent.

FORECAST: The six-month annualised cover is seen at 6.50-6.80 per cent on Thursday.

Gilts

The Reserve Bank of India governor Bimal Jalan's maiden credit policy had a dampening effect on the government securities market. Before the announcement of the policy, the securities' prices increased by Re 1 as the market expected a 2 per cent cash-reserve ratio (CRR) cut.

After the announcement, the prices fell by 30-40 paise.However, they again rose by 40-50 paise in the afternoon, dealers said. "In the morning, many buyers were present in the securities market, though most of them left the front after the credit policy announcement," said a fund manager from the Securities Trading Corporation of India.

The wholesale debt market of the NSE witnessed trading worth Rs 746.94 crore. The 11 per cent government loan maturing in 2002 was traded for Rs 90 crore at a weighted yield of 10.75 per cent. The 11.75 per cent government loan maturing maturing in 2006 was traded for Rs 210 crore.

FORECAST: The government securities prices may crash during the week.