Dealers expect the call rates to decline further on Saturday when the second tranche of the cash reserve ratio (CRR) cut enters the system. The second phase of CRR cut will lead to an inflow of Rs 3,500 crore into the system. Dealers expect call rates to firm in the coming days only if the RBI resorts to open market operations by placing dated securities on its sale window.
FORECAST: Call rates seen at 8-8.25 per cent on Tuesday.

Spot Dollar
The rupee ended marginally firmer on Monday. The Indian unit opened at 43.39/40 and was traded in narrow band of 43.38/3950 in dull trading sessions. "There was good offloading of the greenback by a few banks," said a dealer. Demand primarily came from an oil firm and some other corporates, dealers said. The rupee ended at 43.38/3850 per dollar as compared with its previous close of 43.39/395. "Despite all the bunched weekend flows and the imports, the rupee was very range-bound," a dealer with a private bank said. Cash/spot ended at 0.75/1 paise, cash/tom at 0.50/1 paise and tom/spot at 0.25/0.50 paise. Meanwhile, the Reserve Bank of India (RBI) fixed its reference rate at Rs 43.39 per dollar as against the previous Rs 43.40. The Indian unit ended at 701.5 per pound sterling and 44.74 per euro.
FORECAST: Rupee seen steady at 43.38/39 on Tuesday.

Forward Premiums
Monthly premiums edged up in the near forwards due to paying pressure on Monday. Dealers said that several corporates were paying premiums (sell-buy swaps) in the forward market. The six-month annualised premium ended higher at 4.88 per cent compared with 4.84 per cent in the last session. The forward premiums were 5.50/6.50 paise for November, 21/22 paise for December, 41/42 paise for January, 56/58 paise for February, 74/76 paise for March, 94/96 paise for April, 113/115 paise for May and 134/135 paise for June. "On the whole premiums were stable", said a dealer with a European bank, adding: "A firm spot rupee at 43.39/40 levels and relatively lower call rates at a shade above 8.10 per cent have aided this... the trend is towards softer forward premiums given the fact that the second tranche of a cash reserve ratio cut (CRR) cut is around the corner. The second phase of CRR cut will take effect next fortnight and will lead to an inflow of Rs 3,500 crore into the system.
FORECAST: Monthly premiums seen slightly firmer on Tuesday.Gilts
Bond prices firmed by 5-10 paise on Monday. Dealers said that players were buying long-end securities at the lower levels of the previous session. "The rise was more pronounced in the long-end gilts, though a few stray deals took place at the short-end," informed a dealer. The 11.83 per cent 2014, which made its debut through the Rs 3,500 crore auction last Thursday rose by 11 paise. The security ended at Rs 100.44 (Rs 100.33). Other actively traded securities were the 12.40 per cent 2013, dealt at Rs 104.48 (104.25) and 12.32 per cent 2011 at Rs 104.27 (104.13). "Bond prices may see a rally.the have gone up after the first tranche of the 1 percentage point cash reserve ratio (CRR) cut", a dealer with a primary dealership said. The second phase of CRR cut will be effected next fortnight and will lead to an inflow of Rs 3,500 crore into the system.
FORECAST: Bond prices seen firmer on Tuesday as liquidity conditions remain good.

(Compiled by Anurag Joshi)