The call money market was steady on Tuesday in the absence of fresh fund flows. Most deals were struck in the 8-8.05 per cent band, unchanged from the previous close. Call rates opened at 8 per cent and inched up soon to 8.5 per cent and stayed firm at this level for most part of the day. Towards the close, overnight rates fell a little to 8-8.10 per cent.

Call rates are likely to hover around the above range for at least the next one week, dealers said. However, in case the rupee slips against the dollar, call rates may be affected. The forex market has recently witnessed some nervousness following the outcome of the assembly elections, where the ruling BJP recieved a thrashing from the Congress.

FORECAST: Call rates are seen in Tuesday's range on Wednesday.

Gilts

The government securities market witnessed some action as prices of near-term securities edged up on some uncertainity on the rupee front. However, the prices across most maturities remained steady with theactivity centred around the shorter end.

The gilts market had exhibited nervousness after the rupee fell at the beginning of last week on corporate demand. "It is premature to expect a rally in bonds and the buying interest is restricted to a few market favourites," a dealer from a private bank said.

The wholesale debt market of the NSE witnessed increased activity with trades worth Rs 367.81 crore. The 11.40 per cent, 2000 government security traded worth Rs 70 crore at a weighted yield of 11.36 per cent. The 12.50 per cent and the IDBI 1999 bond traded worth Rs 13 crore at a weighted yield of 11.92 per cent.

FORECAST: Currency movement will dictate gilt prices on Wednesday.Spot Rupee

The rupee showed signs of weakening against the dollar on Tuesday owing to corporate demand. The Indian currency opened at the previous close of 42.57/58 and dipped to 42.61/62 on dollar demand from banks for their corporate clients. "Deals were conducted at42.62," a dealer from a private bank confirmed. There was selling pressure as soon as the rupee touched 42.60, dealers said. The State Bank of India sold dollars after the rupee touched 42.62, they added. This saw the rupee gain to 42.56/57 at the close of trading. "The rupee cannot be sustained at 42.60 and there is a fair amount of selling pressure at this level," a dealer from a public sector bank said. The Reserve Bank of India has fixed the reference rate for the dollar at Rs 42.58 compared with the previous fix of Rs 42.63.

FORECAST: Year-end pressure to cover may weaken the rupee on Wednesday.

Forward Premiums

Forward premiums weakened initially but strenghtened later on the back of a rising spot rupee on Tuesday. Although political instability had been discounted, corporates will seek to cover their holdings as the year-end is approaching, dealers said. "This will see the forward rupee weaken," a dealer from a private bank said. The one-month premium (annualised) closed at 6.75 percent, six months at 7.8 per cent and one year at 8.5 per cent. "The paying pressure is just not sustainable. After a point there is selling pressure and this leads to the strenghening of the forward rupee," a dealer from a private bank said. The State Bank of India was not seen striking large deals in the forward market, dealers said.

FORECAST: The forward rupee may weaken on Wednesday.