Call rates tightened towards the close to 9.50 per cent on Thursday, compared with their previous close of 9.15 per cent, owing to tight money market conditions. Call rates opened at 9.25 per cent, 15 basis points higher compared with their previous opening level of 9.10 per cent, owing to demand for funds.

Throughout the day, call rates ruled above 9.25 per cent owing to high demand for funds. "The existing high demand for funds is not met by the available supply as Rs 5,000 crore has gone out of the system through advance tax payment which has tightened the liquidity conditions," dealers said. According to dealers, the approaching state loan has also created surplus demand for funds. Though call rates are ruling above the repo rate, the central bank received only one application worth Rs 15 crore at its four-day 8 per cent fixed-rate repos.

FORECAST: Call rates are seen at 9.15-9.50 per cent on Saturday.

Spot Dollar

The spot rupee moved in a narrow 2 paise range onThursday owing to subdued trading in the forex market. The Indian currency strengthened by 1 paise to 42.53/54 against the dollar compared with its previous opening level of 42.54/55.

Throughout the day, the rupee ruled at the opening level owing to lack of demand from corporates and banks.

The spot rupee closed at 42.53/54, unchanged from its opening level. "The spot rupee is expected to remain stable at 42.52/60 throughout the week owing to lack of any month-end demand from importers. The existing small demand is met by the supply in the system," dealers said. Dealers do not expect any fresh dollar supply into the system during the week. The Reserve Bank of India reference rate for the dollar was Rs 42.54 (Rs 42.55).

FORECAST: The spot rupee is seen at 42.50-42.60 on Monday.

Forward Premiums

Forward premiums firmed up by 1-2 paise on Thursday owing to marginal paying pressure by importers. According to dealers, premiums are expected to rule stable throughout the week owing to lack ofdollar demand. "No fresh inflow is expected during the week," said a dealer from a private bank.

The six-month annualised premium quoted at 7.38 per cent, three months at 6.28 per cent and one month at 5.4 per cent. The December premium closed at 0.50-1 paise (1-2 paise), January 18-21 paise (18-20 paise), February 39-42 paise (39-40 paise), March 66-69 paise (67-69 paise), April 98-101 paise (98-100 paise), May 126-130 paise (126-128 paise), June 156-159 paise (156-158 paise), July 186-190 paise (187-190 paise), August 219-223 paise (221-224 paise), September 253-257 paise (254-257 paise), October 285-290 paise (286-289 paise) and November 319-324 paise (323-326 paise).

FORECAST: The six-month annualised premium is seen at 7.2-7.8 per cent on Monday.

Gilts

Prices of government securities fell by 2-3 paise on Thursday owing to marginal selling pressure in the market. "Most banks were seen offloading short-term gilts as they want to remain liquid for the state loan auction on December 28,"dealers said. According to dealers, another reason for the falling prices is the tight call rate which is ruling above the repo rate. The 12 per cent 1999 paper traded at Rs 100.38, the 11.75 per cent 2006 paper at Rs 98.18 and the zero coupon 1999 paper at Rs 100.38 (Rs 100.41).

The wholesale debt market of the NSE witnessed trades worth Rs 275.17 crore (Rs 172.14 crore). The 11.40 per cent government loan maturing in 2000 traded worth Rs 30 crore at a weighted yield of 11.33 per cent. The debentures of Reliance Capital maturing in 2002 traded worth Rs 10 crore at a yield of 15.91 per cent.

FORECAST: Gilt prices are expected to remain stable Saturday.