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FE NEWS SERVICE
Call Money
Call rates remained range bound on Friday as the busy-season credit policy kept short-term interest rates unchanged. Call rates opened at 9 per cent, marginally higher than their previous close of 8.75 per cent. Overnight rates ruled tight at 9 per cent in the morning owing to lack of demand for funds. Later call rates eased by 50 basis points to close at 8.5 per cent. "Month-end demand for funds coupled with clearance of some high-value cheques in the afternoon created demand and eased the rates," dealers said. The system is flush with liquidity as the total outstanding in repos is to the tune of Rs 4,330 crore. The total outflow from the system through the Reserve Bank of India repos was to the tune of Rs 1,330 crore while there was no inflow through fixed-rate repos. About Rs 300 crore has come into the system in the last two days through G-Sec redemption.
FORECAST: Call rates are seen in the 9-9.25 per cent band on Monday.
Spot Dollar
The spot rupee was highlyvolatile on Friday and moved in a 10 paise band. The Indian currency opened at 42.31/33 against the dollar, compared with its previous close of 42.33/34. The rupee strengthened initially by 2 paise to 42.29/30. But, after the credit policy announcements, the rupee weakened by 7-8 paise to 42.38/40 owing to high corporate demand for dollars. According to forex dealers, the State Bank of India reportedly bought dollars which contributed to the weakening of the rupee. However, the Indian currency strengthened by 6 paise in the afternoon to 42.32/33 owing to little demand for dollars. The rupee finally closed at these levels.
FORECAST: The spot rupee is seen between 42.30 and 42.40 on Monday.
Forward Premiums
Forward premiums were volatile on Friday. Forward premiums across all maturities opened 1-2 paise higher than their previous closing levels. However, near-end premiums slipped by 1-4 paise and far-end ones by 5-10 paise towards the close. "The State Bank of India and corporate receivingin forwards resulted in a fall at the near end by 1-2 paise and the far end by 10 paise," dealers said. The six-month annualised premium quoted at 7.35 per cent, three months at 6.33 per cent and one month at 5.10 per cent. November premium quoted at 15-17 paise (17-19 paise), December at 37-40 paise (39-42 paise), January at 65-70 paise (68-72 paise), February at 91-94 paise (94-99 paise), March at 121-124 paise (127-132 paise), April at 150-154 paise (158-161 paise), May at 179-183 paise (187-192 paise), June at 208-212 paise (218-223 paise), July at 238-242 paise (249-253 paise), August at 270-275 paise (279-283 paise) and September at 298-302 paise (308-312 paise).
FORECAST: The six-month annualised premium is seen at 7.6-7.8 per cent on Monday.
Gilts
Marginal buying interest was seen in short-dated gilts and their prices improved by 1-2 paise on Friday morning. However, after the credit policy announcements, activity in the money market came to a standstill. In the morning, somebuying interest was seen in the 11.40 per cent 2000 paper, the zero coupon 2000 paper, the zero coupon 1999 paper and the 11.55 per cent 2001 paper. The 11.40 per cent 2000 paper traded at Rs 100 (Rs 99), the zero coupon 1999 paper at Rs 97.85, the zero coupon 2000 paper at Rs 82.80/81 and the 13.70 per cent 1999 paper at Rs 78.80 per cent. According to dealers, market players were not able to take a view on G-Sec. "The announcement of a 2.5 per cent risk weightage assigned to central and state government securities or securities guaranteed by the central and state governments saw market players shy away from the money market," a dealer from a private bank said.
FORECAST: Short-term gilt prices are expected to remain stable on Monday.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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