Call rates ruled easy on Monday as the first tranche of resurgent bond funds started circulating among banks. Overnight rates opened at 8 per cent, a tad higher than their previous close of 7.90 per cent. Throughout the day, call rates moved in narrow range of 7.90 per cent to 8 per cent. "Banks are not borrowing funds from the call money market as they are flush with funds," dealers said. According to money market dealers, liquidity is easy as about Rs 8,000 crore is locked in the Reserve Bank of India's fixed-rate repos. "As call rates are expected to ease further during the week, most banks were lending in the RBI's 8 per cent fixed-rate repos," dealers said. The central bank mopped up Rs 5,824 crore through three-day repos.

FORECAST: Call rates are seen at 7-8 per cent on Tuesday.

Gilts:

Short-dated government securities' prices appreciated by 3-8 paise on Monday on demand from a few nationalised, foreign and private banks. "There is a lot of buying interest inshort-dated papers as banks are flush with resurgent bond funds," dealers said. Buying interest was seen in gilts like the zero coupon 1999 paper, the 11.55 per cent 2001 paper and the 11.64 per cent 2000 paper. The zero coupon 1999 paper quoted at Rs 96.79-96.80 (Rs 96.73), the 11.55 per cent 2001 gilt at Rs 100.01 (Rs 99), the 11.64 per cent 2000 paper at Rs 100.60 amd the 11.98 per cent 2004 new loan at Rs 99.86.

FORECAST: Short-dated gilt prices are expected to appreciate by 4-6 paise on Tuesday.

Spot Dollar:

The foreign exchange market witnessed dull trading on Monday. The Indian currency opened at 42.51/53 against the dollar and ruled steady for most part of the day. "Trading was listless and the spot rupee was steady," a dealer in a private bank said. State Bank of India quoted at 42.51/53, but made neither purchases nor sales, forex dealers said. The rupee finally closed at Rs 42.49/50 compared with its previous close of 42.51/52. There were no importers in the market, dealerssaid. According to analysts at I-Sec, the rupee is unlikely to fall sharply in the immediate future. A weekly I-Sec report said that the Reserve Bank of India has effectively controlled speculative play in the currency markets and the arbitrage between the call money and forex markets.

FORECAST: The spot rupee is seen at 42.50/55 on Tuesday.

Forward Premia:

Forward premiums eased by 2-3 paise across the board on Monday as the spot rupee gained against the dollar. "There was some import covering," a dealer said. The six months (annualised) forward premium closed at 7.75 per cent and the one-year one at 8.50 per cent. September premium ended at 6.17 per cent, October at 6.57 per cent, November at 7.05 per cent, December at 7.17 per cent, January at 7.35 per cent, February at 7.65 per cent, March at 7.92 per cent, April at 8.12 per cent, May at 8.24 per cent, June at 8.31 per cent, July at 8.39 per cent and August at 8.46 per cent. September premium (in paise) ended at 1-3 paise, October at26-29 paise, November at 51-54 paise, December at 80-83 paise, January at 106-110 paise, February at 136-140 paise, March at 167-171 paise, April at 201-206 paise, May at 234-239 paise, June at 267-272 paise, July at 297-304 paise and August at 331-337 paise.

FORECAST: The six-month annualised forward cover is seen at 7-7.5 per cent on Tuesday.