Call rates ruled below the repo level due to lack of demand for funds on reporting Friday. The call rates opened at 5.50-6 per cent in the morning, compared with the previous close of 7.75 per cent. The rates remained easy throughout the day due to lacklustre demand for funds.

However, the rates firmed up slightly towards the close to 7.75-8 per cent due to marginal demand for funds by a few banks. "Due to clearing of some high-level cheques late at noon the overnight rates tightened slightly," said money market dealers.

According to money market sources, the call rates are expected to remain easy and close to the repo level as the system is flush with funds. The total outstanding in the RBI repo is around Rs 4,000 crore. The total outflow from the system on Friday was to the tune of Rs 355 crore. About Rs 822.93 crore came into the system through 364-day T-bills redemption.

FORECAST: Call rates are likely to remain at the repo level on Saturday.

Spot Dollar

Thespot rupee remained highly volatile on Thursday. The Indian currency opended at 42.31/32 against the dollar, unchanged from its previous close. Marginal corporate buying weakened the rupee by 2 paise to 42.33-34 against the dollar.

However, some selling by European banks at noon strengthened the Indian currency to 42.29/30 against the dollar. The rupee finally closed at these levels, strengthened by one paise as against the previous close of 42.31/32 against the dollar. According to forex dealers, the rupee is expected to remain stable during the week as the demand for dollars is not much.

"Marginal damands are met by the sufficient supply in the system," said a dealer from a foreign bank. The RBI reference rate for the US dollar was Rs 42.33 on Friday as against the previous peg of Rs 42.35 crore.

FORECAST: The rupee is seen in the band of 42.28-38 on Saturday.

Forward Premiums

The forward premiums remained stable on Friday owing to lack of receipts by exporters and negligible payinginterest by importers. The forward premiums softened by 1-2 paise across all maturities compared with their previous closing levels.

The six-month annualised closed at 7.5 per cent, three months at 6.10 per cent and one month at 4.6 per cent. The November premium quoted at 8-9 paise (9-10 paise), December at 28-31 paise (29-32 paise), January at 54-58 paise (55-58 paise), February at 81-85 paise (82-86 paise), March at 111-114 paise (112-115 paise), April at 141-145 paise (142-145 paise), May at 171-174 paise (172-175 paise), June at 201-204 paise (202-205 paise), July at 231-236 paise (233-237 paise), August at 263-268 paise (264-269 paise), September at 294-299 paise (295-300 paise) and October at 330-335 paise (331-336 paise).

FORECAST: The six-month annualised premium is seen betweeen 7.4-7.8 per cent on Saturday.

Gilts

The short-term gilts prices have improved by 5 paise as the market sentiment has improved slightly owing to the centre's private placement of Rs 5,000 crore with theRBI early this week.

"As there is not much likelihood of a gilt paper in the near future and the fact that call rates are ruling at repo levels, banks are parking surplus funds in short-term gilts," said a money market dealer. The actively traded securities on Thursday were the zero coupon 2000 paper which was quoting at Rs 82.93 (Rs 82.98) and 91-day treasury bills.

The wholesale debt market of NSE witnessed trades worth Rs 340.94 crore.The 11.40 per cent government loan maturing in 2000 was traded worth Rs 30 crore at a weighted yield of 11.38 per cent. The zero coupon government bond maturing in 2000 was traded worth Rs 30 crore at a weighted yield of 11.35 per cent.

FORECAST: Short-term gilts prices are expected to remain stable on Saturday.