The addition to banking sector liquidity is estimated to be around Rs 4,000crore, an ICICI Securities (I-Sec) report on Wednesday said.

"According to the latest weekly statistical supplement (WSS) from RBI, thecash in hand with scheduled commercial banks as on November 5, 1999 was Rs4,541 crore. Taking this additional liquidity into account means that theshort-term liquidity outlook is good with aa additional inflow of Rs1,312.27 crore expected in the remaining part of the fortnight.

This surplus liquidity is reflected in the fact that call rates persistedclose to 8 per cent in the during the last fortnight despite a Rs 5,000crore auction outflow on November 24," the report said.

The report said as chances of economic recovery have gained momentum,outlook on the forx front have also improved. "Spot rupee has been very firmat 43.38/40 per USD, while the six month forward premia has moved downsignificantly from 4.90 to 4.60 per cent. As per RBI's WSS, forex reserveshave increased by Rs 720 million between October 29 and November 19, 1999.The strength of the rupee may have motivated significant amount ofsterilisation, which would further add to the domestic liquidity," I-Secsaid.

"As a result of the Y2K-related stabilisation measures announced in therecent credit policy, call rates during December and January have beencapped at 10.5 per cent. However, considering that at present, a significantamount of the tier-I refinance available to primary dealers is stillundrawn, there is a large cushion in the system before call rates increaseto 10 per cent and then to 10.5 per cent," the report said.

The report also hinted at a possibility of a significant pick-up in thecredit offtake during the last quarter of the current fiscal. "We can expecta 10-15 per cent jump in the credit offtake in January 2000, as compared tothe Rs 6,400 crore credit offtake for the same period in 1999," I-Sec said."Inventory report from the American Petroleum Institute (API) seems toindicate that crude prices are not expected to decline at least during thewinter months ahead.

On the domestic front, the improved liquidity conditions have lead to alltreasury bill auctions (except one 91-day T-bill auction) being fullysubscribed. The past fortnight saw liquidity chasing the long end of theyield curve and Rs 3,500 crore of 12.29 per cent 2010 stock was bought bythe market within minutes of RBI placing it on the OMO sales window," I-Secsaid.