Call Money

Call rates tightened initially on Tuesday. Opening the day higher at 7.80-8.00% from yesterday’s close of 7.40-7.60%, call rates moved up in the morning amidst tight condition in the call market. Call rates rose to a peak on a heavy rush to cover reserve products in late morning deals with a major lending participant opting out of the market. Increased liquidity saw call rates falling back to 7.50% levels in the afternoon. The intra-day high was seen at 8.00% with intra-day low at 7.50%. Most of the transactions were done in the region of 7.80-8.00 per cent in the morning with only stray deals struck around 8.25 per cent. At close, call rates were seen at 7.50. The RBI did not receive any applications at its repos-auction. It injected Rs 10 crore into the system through its one-day reverse repo auction at a cut-off price of 8.50%. Meanwhile, the NSE pegged its overnight Mibid and Mibor at 7.86% and 8.06% respectively.
FORECAST: Call rates seen tighter on Wednesday

Spot Dollar
The rupee appreciated by three to four paise against the dollar on Tuesday. Opening the day at 47.1450/15 from its overnight close of 47.14/1450, the rupee ruled in a narrow range between 47.14 and 47.1650 levels. “Mild exporter dollar sales led some banks to unwind long positions in early trade due to lack demand for dollars from corporates and importers”, dealers said. Mostly foreign banks were selling dollars on behalf ofexporters, but later public-sector banks also unwound long dollar positions in the absence of importer demand. The dollar reached an intra-day low of 47.1450/15 and an intra-day high of 47.1050/11. At close, the rupee was seen at 47.1050/11, a three and a half paise gain. The RBI fixed its reference rate for dollar at 47.14, as against yesterday’s fix of 47.16. In cross-currency trades, the rupee closed against the euro at 40.11 while it closed against the pound-sterling at 65.94
FORECAST: Rupee seen seen around 47.11-47.15 levels on Wednesday.

Forward Premiums
Forward premiums eased on Tuesday. The six-month and one-year annualised premia closed at 4.67% (4.76%) and 4.67% (4.64%) respectively. Easing of call and strengthening of the rupee against the dollar helped ease forward premia levels on Tuesday. Premiums, especially in the far-forward deals, were seen moving down. The rupee gained three and a half paise on Tuesday and closed at 47.1050/11 levels.
The benchmark six-months forward dollar premiums payable at end-December closed at 97/99 paise, lower from their Monday’s close of 101/102 paise. Cash/tom premiums closed at 0.55/0.60 paise while cash/spot premiums closed at 1.10/1.15 paise. On month-wise premiums, July dollar closed lower at 7.00/7.14 paise, while in the far forwards, January’02 dollar closed lower at 117/118 paise with June’02 dollar lower at 207/208 paise.
FORECAST: Forward premiums seen easing on Wednesday.

Gilts
Gilts prices declined but recovered sharply later on Monday. Prices in the medium and longer-end papers declined but recovered sharply later in the day. The benchmark 10-year yield fell to Rs 112.95 after closing yesterday at Rs 113.35. It rose to close at Rs 113.45. The 11.50% 2011A however closed at Rs 113.40 while the 11.40% 2008 and 11.30% 2010 closed at Rs 114.32 and Rs 111.90 respectively. The market rose on the WMA clarification by the government as well as call easing in afternoon trading. There will be no auction this week. “Volumes in the NSE’s wholesale debt market (WDM) also rose today after yesterday’s low of Rs 1,604.05 crore. Today’s volume was Rs 3,149 crore”, a dealer said. The RBI injected Rs 10 crore through reverse-repo. On the NSE’s WDM, trades worth Rs 560 crore were seen in the 11.50% 2011A paper, while those in the 11.40% 2008 and the 11.30% 2010 amounted to Rs 595 crore and Rs 150 crore respectively.
FORECAST: Gilt prices seen gaining on Wednesday.

(Compiled by Ujjal K Basu Roy)