On Monday, after the rate cuts were announced, the gilts prices shot up by 30-35 paise and forward premium went up by 10-15 paise.The Reserve Bank capped the yields on the long-term securities through its sale list on Monday triggering bearish sentiments for longer tenure securities. The wholesale debt market of NSE witnessed trades worth Rs 1316.50 crore against the Monday level of Rs 734.32 crore.

In the bond market, the price of 12.50 per cent 2004 paper shot up by almost 30 paise to Rs 103.20 as against the previous level of Rs 102.90. The 11.40 per cent 2000 paper quoted at 100.82 as against Rs100.65 per cent on the previous day. "Hectic trading was seen in the gilts market. Most banks sold gilts and booked huge profits," dealers said. Hectic trading in bonds flared the prices of gilts sharply by 20-30 paise. "Increasing prices of gilts saw huge quantum of profit booking by banks," money market dealers said. The market witnessed selling pressure and banks were offloading short and medium term papers and booking profits. The yields on the long-term securities which was expected to fall by 40 basis points are now expected to fall by 20 basis points after the RBI cut the yield of the 11-year paper to 12.25 per cent from 12.29 per cent.

The overnight call market witnessed moderate activity with matching demand and supply. Most of the deals were conducted at 7.75 per cent level. "Call rates are holding firm as liquidity is expected to tighten a bit on account of advance tax outflows around the 29 of this month," a dealer with a European bank said. The Reserve Bank of India received only oneapplication for Rs 23 crore for its three-day six per cent repo.

In the forex market, forward premiums fell by 7-8 paise from their previous closing levels. Near terms forwards opened 4 to 6 paise higher in early trades, but far terms moved in 5 to 10 paise band throughout the day. "Forwards tracked the movement in the spot rupee", dealers said. The Indian currency opened at 42.50/51 to a dollar, fell to an intra-day low of 42.56/57 levels during the day to finally close at 42.49/50 against dollar.The six-month annualised premium was quoted at 6.96 per cent as against Monday's close at 7.43 per cent.