Call Money
Call rates rose sharply in early trade on Wednesday on the back of strong demand amid tight liquidity. Liquidity in the banking system tightened following the ReseRBI’s Rs 8,000 crore twin-bond auction on Monday. Call rates opened around 9.75-10.00% and traded at higher levels. A few stray deals were even said to be have done at 12%. “Strong demand and restricted supplies at higher levels for most part of the day was the main reason for call to rise,” a dealer said. Later, the RBI injected Rs 7,675 crore via its reverse repo which helped ease the call rates. A large state-run bank also was said to have lowered its lending rate which helped call rates cool off. Private and foreign banks were the main borrowers while state-run banks were the main lenders, who hiked up rates in early trade to take advantage of the strong demand. Call closed at 8.50-8.75%. Elsewhere, the National Stock Exchange NSE mibor at 10.61% and 11.44% respectively.
FORECAST: Call rates seen firm Thursday.

Spot Dollar
The rupee traded in a tight 3-4 paise band for most of Wednesday. The rupee opened firm on dollar sales by foreign banks who were lightening their positions on the back of high call rates. Supplies from state-run banks and a few foreign banks helped the rupee to appreciate in late trade. State-run banks again bought back excess dollar to maintain a range in the rupee. The intra-day high for the rupee was 48.0100/0125 in late trade on light demand. State-run banks demand for dollars continued till the end of trades. The rupee opened firm and persistent dollar supplies and absorbing of dollars by state-run banks kept the rupee trade in a narrow range. The rupee opened at 47.9700/9800. at 47.0950/48.0100 and per dollar. Meanwhile, the RBI fixed its reference rate for the dollar at 47.99 as against its previous fix 48.01. In cross-currency trades, the euro closed at 43.27, while the pound-sterling closed at 69.29.
FORECAST: The rupee seen range-bound Thursday.

Forward Premiums
Forward dollar premium rose slightly in early trade but eased off following a weakening the call rates. A stable rupee also helped the forward premiums to ease. Overall the premiums traded in a tight range. Players offloaded long dollars sighting a gain in the rupee. Players had taken long positions after news of US military retaliation Afghanistan caused panic in the domestic markets earlier. Call rates rose in early trade, following restricted supplies and strong demand. Call rates eased after a large lender lowered its rates and RBI’s Rs 7,675 injection of funds via reverse repo at 8.50%. The benchmark six-month annualised premium closed at 6.15% while the annualised one-year premium closed at 6.00%. In month-wise premiums, October dollar traded at 11/12 paise, while in the far forwards, January dollar traded at 82/84 paise with September dollar at 267/269 paise.
FORECAST: Forward premiums seen range-bound Thursday.

Gilts
Gilt prices continued to remain firm on Wednesday despite the high call rate. Gilts prices rose by around 20 paise on Wednesday. The high call rates had moderate impact on the underlying bullish sentiment. Traded volumes improved as good demand seen for the new 9.85%, 2015 paper continued. However, profit-buying seen at the lower levels helped the correct prices. “Demand was strong through the day despite the high call rates and market players see the tight liquidity condition to be temporary,” a dealer at broking firm said. However, market continued to remain uncertain about the future. News of US retaliatory attacks on Aghanistan for the September 11 terrorist attacks has dampened the market sentiment. On the NSE’s wholesale debt segment, trades worth Rs 2,873 crore were seen. Trades worth Rs 383 crore were seen in 11.03% 2012 paper while 11.40% 2008 paper saw trades worth Rs 340 crore.
FORECAST: Prices seen firm Thursday.

(Compiled by Srikesh P Menon)