The overnight call rates firmed by 10 basis points on Monday owing to tight liquidity conditions. The call rates opened tight at 8.25-8.30 per cent on Monday against the previous close of 8.10-8.15 per cent. Throughout the day, the rates ruled above the refinance rate due to tight liquidity condition and high demand for funds.

The overnight call rates opened at 8.25-8.30 per cent and ruled at these levels throughout the day to finally settle at 8.15-8.25 per cent towards the close. The Reserve Bank on Monday did not receive any application for a three-day fixed rate repo in government of India dated securities for parties holding SGL and current account. According to market sources, many market participants have availed of the refinace facility at bank rate. "Even with the release of Rs 3,400 crore into the system on Saturday via CRR cut tax outflow and payment by oil companies to government on account of share swap would further tighten the liquidity in the system," dealers said.

FORECAST: The call rates are seen between 8-8.30 per cent on Tuesday.

Spot Dollar

The rupee moved in a narrow five paise band between 42.48/52 against dollar on Monday. The Indian currency strengthened to an intra-day high of 42.48/49 against dollar towards the close owing to marginally high dollar supply into the system. The Indian currency opened at 42.51/52 against dollar unchanged from their previous close.

Marginally high supply came into the system towards the fag end which pushed up the Indian currency by four paise to 42.48/49 aggainst the greenback. The rates finally closed at these levels. The RBI reference rate for US dollar was three paise lower at 42.50 as against 42.53 on the previous day. Meanwhile, the Indian currency opened at 45.95 agaisnt euro, recorded an intra-day high of 46.35 to finally settle at 46.38 against euro.

Forecast: The rupee is expected to rule between 42.48/56 against dollar on Tuesday.

Forward Premium

The forward premium across theboard eased by 3-4 paise on Monday owing to slightly higher receiving by corporates on Monday. The premiums eased after the Indian currency strengthend by four paise against dollar.

The six month premiums quoted at 7.25 per cent (7.3 per cent), three months at 7.15 per cent (7.1 per cent) and one month at 7.6 per cent. March premiums closed at 16-17 paise (16-18 paise), April at 42-44 paise (43-46 paise), May at 64-66 paise (65-68 paise), June at 92-94 paise (93-97 paise), July at 116-118 paise (117-119 paise), August at 142-144 paise (143-145 paise), September at 167-170 paise (170-173 paise), October at 197-200 paise (199-201 paise), November at 224-227 paise (226-229 paise), December at 252-255 paise (282-285 paise) and January at 279-280 paise (282-285 paise).

FORECAST: Six-month annualised forwards seen in a band of 7--7.8 per cent on Tuesday.

Gilts

Medium and long term gilts prices firmed up by 40-60 paise on Monday owing to high demand for medium and long term papers by traders."Expecting a further hike in the gilts prices banks were buying medium and long term gilts," money market dealers said.

According to traders, price rise is due to alignment of the yield curve which is currently skewed. The yield of 10-year paper has fallen from 12.25 per cent to 11.97 per cent in the last one week. According to dealers, the yield of short term papers have fallen by almost 100 basis points since the budget announcements. The 11.40 per cent 2000 paper was traded at Rs 100.85 (Rs 100.60), 11.55 per cent 2001 paper at Rs 100.89, 11.98 per cent 2004 paper at Rs 101.60, 12.50 per cent 2004 paper at Rs 103.60, 12.59 per cent 2004 paper at Rs 103.75 and 11.10 per cent 2003 paper at Rs 99.14 per cent.

Forecast-Gilts prices are expected to firm up on Tuesday.