Overnight rates softened to close at 9.90-10 per cent on reporting Friday. Opening the day 10-10.25 per cent, unchanged from its last close, call rates held these levels for most of the day. "The rates held at over 10 per cent on reporting Friday on outflows from the Reserve Bank's twin-bond auction", a dealer with a European bank said. Payout for Reserve Bank's auction of the 11.90 per cent 2007 for Rs 3,000 crore and 12.60 per cent 2018 for Rs 2,000 crore was on Friday. Dealers said quite a few banks and primary dealers had also availed of the additional refinance of 10 per cent from the central bank. Most of the deals were struck at 10.15-10.20 per cent levels. The Reserve Bank did not received any response to its four-day 6 per cent fixed-rate repos.

FORECAST: Call rates seen at 10-10.25 per cent levels on Saturday.

SPOT DOLLAR

The rupee gained by 10 paise on Friday to close at 43.42/43. Opening the day at 43.50/51 from its overnight close at 43.52/53, the rupee continued to gain in strength after the victory of the BJP-led National Democratic Alliance at the hustings. "There was considerable amount of dollar sales both by exporters and foreign funds", a dealer with a US-based bank said. T News of the sensex crossing past the crucial 5,000 mark fuelled dollar sales on anticipated fresh inflows. "The State Bank did two-way business... in fact the State Bank's dollar-purchases at 43.41/42 levels, halted any further gains for the rupee", a dealer with a European bank said. he rupee has gained 18 paise over the last 72 hours from its Tuesday's close at 43.5875/5925. The rupee's upswing was triggered off on Thursday after Moody's raised the outlook to positive from stable for India's Ba2 ratings on foreign and domestic currency debt. There was cash no cash business today with the US markets remaining closed on Monday. Cash/spot wasquoted at 3.25/3.50 paise (4.50/5.50 paise).

FORECAST: Rupee seen at 43.40/44 levels on Monday.

FORWARD PREMIUMS

Forward premiums eased sharply on Friday with the six-month annualised forward cover closing at 5.25 per cent (5.50 per cent). "Premiums moved in line with a slightly stronger spot-rupee at 43.42 levels and softer call rates at 10.25 per cent", a dealer with a brokerage said. October premiums finished unchanged at 12/13 paise with while April dollars quoted at 137/139 paise and May at 147/149 paise. "News of the BJP-led National Democratic alliance ganing a simple majority at the Centre, Moody's upgrade, the sensex sport to over 5,000 all had a postive effect on forwards", a dealer with a brokerage said. Slight paying was seen, but dealers said that exporters and foriegn funds were seen selling dollars. "The decline in call rates also helped premiums ease", a dealer with a Gulf-based bank said, adding: "Current levels are attarctive enough to cover... we could see paying interest coming in over the next week".

FORECAST: Six-month annualised forward cover seen at 5.20 per cent levels on Monday.

GILTS

Gilt prices continued to show a slightly bullish trend on Friday. The 11.90 per cent 2007 bond seen at Rs 102.90 with 11.75 per cent 2006 at Rs 102.67 levels (Rs 102.64). "The decline in call rates to 10-10.25 per cent levels helped bond prices gain", a dealer with a primary dealership said. Payout for the Reserve Bank's auction of the 11.90 per cent 2007 and 12.60 per cent 2018 for Rs 3,000 crore and Rs 2,000 crore respectively did not affect bond prices adversely. "Bond prices would have gained further, but call rates at 10 per cent is not allowing the same", dealers said. Call rates held over 10 per cent levels on reporting Friday as quite a few banks and primary dealers had availed of the additional refinance from the Reserve bank at 10 per cent.

FORECAST: Gilt prices seen holding flat on Saturday; slight upward bias seen.

-- Compiled by Raghu Mohan