Call rates tightened to 8.25-8.50 per cent on Monday compared with their previous close of 8 per cent. An expected outflow from the system to the tune of Rs 3,000 crore by way of a state loan led to the rise.

According to money market sources, call rates are expected to rule at 8-9 per cent as liquidity is expected to remain tight during this week. Overnight rates ruled at 8.25-8.50 per cent throughout the day to finally close at the opening levels. "Most banks and institutions did not lock their funds in the three-day money as they wanted to remain liquid so as to participate in the state government loan programme," dealers said.

The Reserve Bank of India mopped up Rs 45 crore through its three-day 8 per cent fixed-rate repos. The central bank received only one application and accepted it.

FORECAST: Call rates are seen at 8-8.5 per cent on Tuesday.

Spot Dollar

The rupee opened at 42.35/36 against the dollar on Monday compared with its previous close of 42.35/36owing to a sufficient supply and lacklustre demand for dollars as the New York market was closed.

The Indian currency remained stable at the opening levels throughout the morning. However in the afternoon, the rupee strengthened to its intra-day high of 42.29/30 owing to a comfortable supply of dollars and negligible demand from corporates.

The State Bank of India held the rupee from appreciating further and bought when the rupee was hovering at 42.29/30. Towards the close, the rupee weakened by 1-2 paise to settle at 42.29/31. The Reserve Bank of India maintained its reference rate for the dollar at Rs 42.36.

FORECAST: The rupee is seen between 42.30 and 42.40 on Tuesday.

Forward Premia

Forward premiums moved in a narrow 1-5 paise range on Monday, closely tracking the spot rupee in a dull market.

Near-term premiums fell by 1-3 paise and far-end ones by 2-5 paise. "Forward premiums across all maturities fell due to some receiving by exporters," forex dealers said. The six-monthannualised premium closed at 8.3 per cent (8.27 per cent), three months at 7.6 per cent (7.17 per cent) and one month at 7.6 per cent (6.97 per cent).

The October premium closed at 10-11 paise (11-13 paise), November at 34-35 paise (34-37 paise), December at 58-60 paise (61-64 paise), January at 88-90 paise (91-95 paise), February at 120-123 paise (123-127 paise), March at 155-157 paise (157-161 paise), April at 187-190 paise (191-195 paise), May at 120-124 paise (224-228 paise), June at 253-257 paise (257-261 paise), July at 289-293 paise (290-295 paise) and September at 353-357 paise (56-362 paise).

FORECAST: The six-month annualised premium is seen at 8.3-8.5 per cent on Tuesday.

Gilts

The gilt market remained stable on Monday owing to lacklustre trading.

"Trades were confined to only two short-term bonds as most players who had bid for the 10-year paper did not take fresh positions," dealers said. The zero coupon 1999 paper traded at Rs 97.35 (Rs 97.19). "Some interest was seenin the 91-day treasury bills," dealers said. The wholesale debt market of the NSE witnessed trades worth Rs 167.04 crore (Rs 287.27 crore). The 12.08 per cent government bond maturing in 2001 traded worth Rs 167.04 crore. The 12.08 per cent government bond maturing in 2001 traded worth Rs 30 crore at a weighted yield of 11.60 per cent. The 15.50 per cent non-SLR bond of ICICI maturing in 1998 traded worth Rs 10 crore at a weighted yield of 11.62 per cent.

FORECAST: Prices of short-term gilts are expected to remain at Monday's levels on Tuesday.