Overnight rates continued to rule firm at a shade above 9 per cent levels on Monday. Opening the day at 9-9.25 per cent, call rates ruled in the 9-9.10 per cent band for most of the day. "Call rates are firm despite the reduced cash reserve ratio at 10 per cent effective from the 8 of this month. Sentiment is towards call rates holding firm at current levels with outflows of Rs 5,000 crore expected on account of re-issuing the 11.19 per cent 2005 and 12.32 per cent 2011 on Tuesday", dealers said. By mid-session, call rates eased to 8.99 per cent levels before closing at 8.75-9 per cent. Inflows of Rs 289 crore are due over the next two days with interest payments on the 12.69 per cent 2002 and the 11 per cent 2002, but this is not seen offering any respite to the inter-bank call market. Elsewhere, the NSE pegged its overnight Mibid and Mibor at 8.90 per cent and 9.15 per cent.

FORECAST: Call rates seen ranged between 8.75 per cent and 9.10 per cent band on Tuesday.

SpotDollar

Dull trades were witnessed in the spot-segment on Monday, and the rupee held at 42.72/73 levels against the dollar. Opening the day at 42.72/73, little changed from its last close at 42.73/74, the rupee was seen in a fine 3 paise band between 42.71 and 42.74 for most of the day. "Corporate interest for dollars is poor", dealers said. At close of trades, the rupee was seen at 42.72/73. "Sentiment is biased towards a stronger, if not steady rupee, in the near term", dealers said pointing out to net foreign instituitional inflows (FII) of $71 million between 3 and 8 May. In April'98, net FII inflows amounted to a shade over $200 million. Meanwhile, cash/spot went 1/1.25 paise (2.50/3 paise), cash/tom at 0.50/0.62 paise (2/2.50 paise) with tom/spot also at 0.50/0.62 paise (0.25/0.50 paise). The Reserve Bank of India fixed its reference rate for the dollar at 42.73 as against its last fix at 42.75.

FORECAST: Rupee seen at 42.73/75 levels on Tuesday.

Forward Premiums

Forwardpremiums softened marginally on Monday on account of poor corporate demand for forward dollars. Receiving interest was seen in the far forwards. The six-month annualised forward cover was seen at 5.85 per cent from its last close at around 6 per cent thereabouts. In the near terms, April premiums closed at 9/10 paise (10/11 paise), June at 29/30 paise (30/31 paise) with July unchanged at 49/50 paise (50/51 paise).

"Premiums are going lower in line with a steady spot rupee. And this is despite the tight call rates at above 9 per cent levels", dealers said. In the far forwards, December dollars were quoted at 165/167 paise (169/171 paise). "Foward-dollar interest is on the duller side because most corporates expect the spot-rupee to remain range-bound up to the general elections in September this year", a dealer with a brokerage said.

FORECAST: Six-month annualised forward cover seen at 5.85-5.90 per cent levels on Tuesday.

Gilts

Short-term bond prices fell on Monday, but medium- tolong-dated ones held steady or posted small gains. "Primary dealers and banks sold short-term stock to make room for the auction tommorrow...firm call rates also drove near-term bond prices down", dealers said. The RBI will re-issue the 11.19 per cent 2005 and the 12.32 per cent 2011 on Tuesday. The 11.64 per cent 2000 went at Rs 101.8-101.10 (Rs 101.09-101.11) while the 11.40 per cent 2000 paper was seen at Rs Rs 100.88-100.93 (100.92-100.94). The 11.55 per cent 2001 was quoted at around Rs 101.24-101.27 (101.25-101.30) with the 10.85 per cent 2001 at Rs 99.90-99.95 (99.95-100.00). The medium-term 11.98 per cent 2004 was seen at Rs102.63-102.64 (Rs 102.65-102.68) with the 12.50 per cent 2004 going at Rs104.46-104.48 (Rs 104.44-104.48). The 11.68 per cent 2006 was seen going higher by almost 20 paise at Rs 100.84-100.86 levels.

FORECAST: Short-term bond prices may gain a bit on Tuesday; medium term seen holding firm.

(Compiled by Raghu Mohan)