Call rates opened at 8-8.10 per cent on Wednesday. Overnight rates ruled at the opening level throughout the day and also closed unchanged at the same level. According to money market dealers, the IMF statement that India should follow a tight monetary policy to curb rupee depreciation created panic in the market.

"Most foreign banks offloaded short-dated gilts from their portfolios and delt in repos at 9 per cent level -- 100 basis points higher than the RBI fixed-rate repos for maintaining SLR requirements," said a dealer from a private sector bank.

There was no inflow into the system through repo reversal though outflow through repos was to the tune of Rs 2,615 crore. "Most banks have already taken positions as the fortnight is coming to a close," dealers said. The NSE's Mibid and Mibor quoted at 7.96 per cent and 8.09 per cent, respectively.

FORECAST: Call rates are seen at 8-8.25 per cent on Thursday.

Spot Dollar

The rupee opened at 42.49/50 against the dollar on Wednesday, unchanged from its previous close. After the IMF said that India should adopt a tight monetary policy to curb rupee depreciation, there was panic in the forex market as importers rushed to cover.

"Market perception that the rupee would depreciate further created a paying pressure in the market," said a forex dealer from a private sector bank. Paying interest by banks and corporates pushed far-end forward premiums up by 20-25 paise.

The rupee weakened to an intra-day low of 42.56/57 owing to importers' demand to buy dollars. But towards the close, the rupee finally strengthened by 1-2 paise to 42.54/56. The RBI's reference rate for the dollar was 42.54 (42.51).

FORECAST: The spot rupee is seen at 42.50/58 on Thursday.

Forward Premium

Far-end forward premiums shot up by 20-25 paise on Wednesday after the rupee weakened to an intra-day low of 42.56/57 following the IMF statement that India should follow a tight monetary policy.

"Dollar-demand from importers in spot and paying pressure in forward jacked up far-end forward premiums. However, near-end premiums weakened by just 2-4 paise," dealers said. The six-month annualised premium quoted at 9 per cent (7.8 per cent), three months at 8.25 per cent (7.10 per cent) and one month at 8.17 per cent (7.5 per cent).

The September premium quoted at 2-3 paise, October at 30-33 paise (27-29 paise), November at 60-63 paise (52-54 paise), December at 88-91 paise (80-83 paise), January at 121-126 paise (105-110 paise), February at 153-157 paise (139-142 paise), March at 185-188 paise (170-173 paise) and April at 213-216 paise (203-206 paise).

FORECAST: The six-month annualised forward cover is seen at 8.5-9.5 per cent on Thursday.

Gilts

The IMF statement on Wednesday created panic in the government securities market, which resulted in a 5-8 paise fall in short-term gilt prices. Most foreign and private sector banks were seen offloading short-term securities, which created selling pressure.

"Most foreign banks were seen selling the 11.55 per cent 2001 and 11.64 per cent 2000 papers," dealers said. The 11.55 per cent 2001 paper price fell by 7 paise to Rs 99.93 towards the close compared with its opening level of Rs 100. The zero coupon 1999 paper traded at Rs 96.80/81 and the 11.64 per cent 2000 paper at Rs 100.60.

The wholesale debt market of the NSE witnessed trades worth Rs 323.39 crore (Rs 300.72 crore). The 12 per cent government loan maturing in 1999 traded worth Rs 30 crore at a weighted yield of 10.60 per cent.

FORECAST: Short-term gilt prices are expected to fall by 3-5 paise on Thursday.