The overnight call money rate opened at Saturday's level of 6.50-6.75 per cent on Monday. It remained at the same level throughout the morning. However in the afternoon it eased to finally close at 6.00-6.25 per cent.

Dealers maintained that there was ample liquidity in the system on Monday as the total inflow through a three-day fixed rate repo was to the tune of Rs 4,200 crore. Due to easy liquidity conditions in the money market, the RBI mopped up Rs 3,703 crore through a three-day fixed rate repo held on August 3. The central bank received three applications and accepted all of them.

According to money market dealers, the rates ruled easy with enough liquidity to match the demand. Total turnover of Securities Trading Corporation of India was Rs 1500 crore on a weighted average rate of 6.46 per cent. Discount Finance and House of India extended market support to the tune of Rs 1,200 crore.

FORECAST: The overnight call money rate is expected to hover around 6.50-7 per cent levelon Tuesday.

Spot dollar

The rupee traded in a fine three paise band on Monday after opening at 42.55, little changed from its previous close. The local currency hovered around 42.53/55 till noon before briefly touching its intra-day low of 42.56. It recovered in late afternoon to trade at 42.53/54 before weakening to close at 42.55/56."

Volumes were low...and trades were dull and the rupee remained range bound. Today's movement were driven by the forward rupee where the State Bank was seen receiving and foreign banks paying," dealers said. However, the SBI was missing from the spot market. The rupee weakened at noon because corporates were remitting dollars to meet their import commitments. "Later in the afternoon, some corporates were seen bringing in dollars which led to the rupee strengthening," a dealer said. The spot rupee had stabilised and could appreciate if sentiments in the forward market improve.

FORECAST: The rupee is seen in a range of 42.51 and 42.60 onTuesday.

Forward premiums

In the forward segment, premiums rose on Monday after foreign banks came in to cover their positions. Dealers said that the State Bank of India was receiving in the morning which saw the forwards falling initially but rose after foreign banks which were short started covering in the forward segment.

"SBI hit some of these banks..so these banks were forced to pay. There was more paying than receiving which saw the forward rupee weakening over Friday's levels," a dealer at a private bank said. "Far terms won't go higher than the current levels of 7-8 per cent as inter bank call rates are still quite low" dealers said. The six-month annualised forward cover closed higher by 50 basis points at 8.05 (7.46 per cent), one month closed at 5.20 per cent, three month closed at 6.6 per cent and the one-year forward premia (annualised) closed at 8.90 per cent.

FORECAST: The six-month annualised forward cover is seen in the 7.50-8.5 per cent band on Tuesday.

Gilts

The prices of short-dated government securities appreciated by 5 paise on Monday. According to dealers, a lot of buying interest was seen in the short-dated government securities market maturing in two to three years.

"Some buying interest was also seen in 10-year and 11-year paper," said a dealer.

The wholesale debt market of National Stock Exchange witnessed trades worth Rs 318.24 crore.

The zero coupon government bond maturing in 2000 was traded worth Rs 50 crore at a weighted yield of 10.94 per cent. The 11.64 per cent government loan maturing in 2000 was traded worth Rs 25 crore at a weighted yield of 10.97 per cent. The 14-day treasury bill maturing on August 15 was traded worth Rs 24 crore at a weighted yield of 6.11 per cent.

FORECAST: The prices of short-dated government securities expected to appreciate on Tuesday.