CALL MONEY
Call rates firmed up on Thursday amid steady demand for funds to meet bond outflows and cover reserves position, dealers said. Call rates opened at 8.9-9.25% against Wednesday's close at 8.75-9.00%. Market players keenly awaited the response to the RBI's auction of the 11.90% 2007 for Rs 4,000 crore. "There were some concerns about some amount of devolvement, but being less than a 10-year paper, it should be absorbed by the market depending on what cut-off rate the RBI decides. But I think it should sail through," N Balasubramanian, head of trading at ICICI said. The last bond sale of 10.95% 2011 on May 29 devolved almost entirely on the RBI. The RBI took 4,886 crore out of 5,000 crore notified anmount on its books. "Call rates will stay around 9% levels as the RBI refinance has almost been exhausted, and the it lent more funds on Wednesday by reverse repo sale at 9%", dealers said. At close, call rates were at 9-9.25 %.
FORECAST: Call rates seen around 9 per cent on Friday.SPOT DOLLAR
The rupee went to a new record low on Thursday. Opening the day at 44.733/75 from its overnight close at 44.725/735, the rupee went to an intra-day low of 44.95 soon thereafter. "Trades were largely inter-bank in early trades, but when the rupee went lower, there was a fair bit of corporate interest for dollars", e-Mecklai's senior vice-president, KN Dey said. Later, the RBI's's statement that trades were small in nature, and therefore, speculative, and that banks must keep square positions saw the rupee gain to 44.58 levels before declining to 44.7350/75 at close of trades. The RBI also added that it will intervene if need be to support the rupee. "Trades were volatile", dealers said, adding: "It looks like the Reserve Bank of India does not want the rupee to go lower than 44.80 levels". The Reserve Bank fixed its reference rate for the dollar at 44.78, nine paise higher that its previous 44.69.
FORECAST: Rupee seen holding 44.80-44.85 levels on Friday.
FORWARD PREMIUMS
Forward premiums were stable on Thursday. "There was no paying pressure, but receiving will commence only after the uncertainty over liquidity clears. The market was waiting to see if the RBI took measures to tighten liquidity to keep the rupee's fall in check", dealers said. Market players keenly awaited the response to the Reserve Bank of India's auction of the 11.90 per cent 2007 for Rs 4,000 crore. "Results of Thursday's seven-year bond auction will influence short-term liquidity", dealers said, adding: "There could be a devolvement also". The six-month annualised forward premium was quoted at 2.97 per cent. June dollars ended at 7/8 paise, July at 18/19 paise, while at the far end November closed at 61/63 paise and December at 72/74 paise.
FORECAST: Premiums seen rangebound on Friday; spot rupee and call rates will hold key.
GILTS
Bond-prices dipped on Thursday noon deals amid firm call money rates and increased volatility in the foreign exchange market. Bond prices fell by 15-20 paise as traders stayed on the sidelines ahead of the price-based auction of 11.90 per cent 2007 bond later in the day. The 11.15% 2002 was quoted at Rs 102.50 compared to Rs 102.35 on Wednesday evening. The 12.50% 2004 was traded at Rs 108.60 compared to Wednesday evening's levels of Rs 108.75. "The bond auction is likely to devolve as there was very little bidding interest among market participants", dealers said, adding: "Liquidity is tight as refinance has almost been exhausted and traders are expecting some tightening measures by the RBI to control volatility in the foreign exchange market". The RBI set a high underwriting commission of 74 paise per hundred (0.74 Rupees) for the bond auction.
FORECAST: Bond prices seen dipping on Friday.
-- Compiled by Raghu Mohan
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.