The overnight call money rates remained firm on Tuesday as it opened at Monday's level of 6.50-6.75 per cent. It remained at the opening level throughout the day. However, the rates eased by 20 to 30 basis point later in the afternoon to finally close at 6.25-6.30 per cent.

According to dealers, the market remained squarish on Tuesday. Dealers maintained that there was ample liquidity in the system as the Reserve Bank of India mopped up Rs 1,878 crore through a three-day fixed rate repo in government of India dated securities for parties holding SGL and current accounts.

The interest rate for the three-day fixed rate repo was pegged at 5 per cent. The central bank received three applications and accepted all of them. The total turnover of the Security Trading Corporation of India (STCI) was Rs 1900 crore and weighted average was 6.44 per cent.

FORECAST: The overnight call money rate is expected to hover around 6.50-7 per cent level on Wednesday.

Spot Dollar

Therupee appreciated on Tuesday on expectations that the proceeds from the Resurgent India Bonds are likely to see the rupee strengthen. The Indian unit appreciated by 4 paise over Monday's close to 42.52 at the end of the day's trade.

Dealers said that the rupee opened at Monday's closing levels of 42.54/56 and stayed there for sometime before corporate selling saw the rupee appreciate at noon.

It continued to appreciate on merchant selling to touch an intra-day high of 42.51 before closing at 42.52. "Importers are waiting till the proceeds of RIB comes into India.

As a result there is no demand for dollars. Corporates are also selling dollars as they think that the rupee could appreciate and the present rates are best to sell", a dealer at a private bank said.

FORECAST: The rupee is seen between 42.51 and 42.60 on Wednesday.

Forward Premiums

In the forward segment, premiums fell immediately after opening on Tuesday. "For most of the day it tracked the spot rupee which appreciated," adealer at a private bank said.

Premium rose on Monday after foreign banks came in to cover their short positions after the State Bank of India was receiving in the morning.

"Far terms are likely to soften from current levels of 7-8 per cent as inter bank call rates are still quite low," dealers said. Dealers said the proceeds from RIB is likely to ease the forward premiums further. The six-month annualised forward cover closed lower by 50 basis points at 7.6 (8.05 per cent), one month closed at 5.20 (4.50 per cent), three month closed at 6.1 (6.6 per cent) and the one-year forward premiums (annualised) closed at 8.50 per cent down from 8.90 per cent on Monday.

FORECAST: The six-month annualised forward cover is seen in the 7-7.50 per cent band on Wednesday.

Gilts

Short-dated government securities prices appreciated further on Tuesday on expectations of the auction of the four-year paper to be held on Wednesday.

The prices of securities maturing in 2000 and 2001 moved up by 5 to 10paise on Tuesday. Dealers maintained that a lot of buying interest was seen in zero coupon 2000 government paper and 12.08 coupon 2001 government loan.

According to dealers, some deals also took place in the four-year paper maturing in 2002 at a coupon rate of 11.15. For tomorrow auction, the market is expecting an yield of 11.70-11.75 per cent.

The wholesale debt market of NSE witnessed trading worth Rs 391.52 crore. The zero coupon government bond maturing in 2000 was traded for Rs 58 crore at a weighted yield of 18.95 per cent.

FORECAST: The prices in the government securities market are expected to remain at Tuesday's level on Wednesday.