G-Sec prices fall, rupee appreciates

Mumbai, Sept 24 | Updated: Sep 24 2005, 06:07am hrs
Government securities plunged on Friday in wake of tight liquidity conditions, which resulted in lack of buying support in the market. The higher than expected inflation data announced further, dampened the sentiments.

The 10 year benchmark government security 7.38% (2015) ended at Rs 102.30 with yields ruling at 7.04%. Among the actively traded securities, 10.25% government paper (2021) slid to Rs 125.98 (7.42%), as against its previous close at Rs 126.11/15. Also, the 7.37% (2014) government bond ended at Rs 102.45 (6.98%) as compared to its previous close at Rs 102.48/52

The domestic annual wholesale price index stood at 3.53% as against 3.16% in the previous week. The inflation data announced was much higher than the expected level of 3.43%. The rise in the inflation levels was marked by high fuel and food prices. Participants also expect a 25 basis point rise in the benchmark short-term interest rate to 5.25% in Reserve Bank of Indias (RBI) next monetary policy review.Meanwhile in the overnight money market, the call rates ended at 5.10-5.20% after reaching a high of 5.30% on Friday. This was primarily on account of squeeze on banks cash surpluses following advance tax outflows last week resulting into low liquidity conditions. This was evident by the fact that Reserve Bank of India (RBI) in its three-day reverse repo auction absorbed Rs 9,725 crore on Friday.

Buoyed, on news that China was widening the yuans trading band against non-dollar currencies, the domestic currency rupee inched up on Friday. Added to this, the Union finance minister P Chidambarams comments that the domestic markets were well regulated and reflected economic fundamentals, gave a further boost to rupee, in wake of improving inflows in the domestic market.

The rupee after touching a one-week intraday low of 43.96, closed at at 43.91/92 per dollar, a tad stronger than its previous close of 43.92/93.

Yuan is an important currency and has a big impact on the domestic currency movements. Hence news that China was widening the daily trading band for the yuan against non-dollar currencies to 3.0% from 1.5% gave a boost to the domestic currency, said a forex dealer.