Call Money
Call rates continued to remain easy amid ample liquidity in the banking system. The call ended below the RBI’.s 7% refinance rate, on Friday. Opening the day at 6.90-7.00%, call rates eased below 7% owing to ample supplies despite the strong early demand. Call rates closed at its intra-day lows of 6.75-6.90%. “Call traded below 7% for most of day,” a primary dealer said. “With no auction announcement coming, liquidity continued to remain comfortable,” the dealer added. Liquidity in the banking system has been comfortable on the back of good inflows from coupons payments. The comfortable liquidity was also indicated by the fact that RBI received a Rs 600 crore bid at its 3-day repo auction Friday. According to market players call has been ruling easy despite strong demand mainly due to ample liquidity. Elsewhere, the NSE pegged its overnight Mibid and Mibor at 6.79% and 6.92% respectively.
FORECAST: Call rates seen ruling easy on the first day of next week.

Spot Dollar
The rupee weakened against the dollar owing to dollar demand from large nationalised banks, which spurred inter-bank short-covering of dollar positions. The rupee move in a very narrow range of 47.0900-47.1050 in early trade amid some dollar demand from a few nationalised banks. Strong surge in demand for dollars in afternoon trade caught players short on the greenback, which led to a further weakening of the rupee. Opening the day at 47.0975, marginally lower from its previous close, the rupee weakened further to close at 47.1225. Consistent purchases of the greenback led to a demand, supply mismatch. Demand outstripped supply. The intra-day low at 47.1250 levels. Meanwhile, the RBI fixed its reference rate for the dollar at 47.10 as against its previous fix 47.12. In cross-currency trades, the euro was closed at 41.48 with the pound-sterling at 67.34.
FORECAST: The rupee seen range-bound on Monday.

Forward Premiums
Forward premia softened on the back of comfortable liquidity in the banking system. Premia moved in a narrow range, however, trading activity was quiet. Also, as call continued to remain easy amid ample liquidity in the banking system, forwards eased slightly.Liquidity in the banking system has been comfortable on the back of good inflows from coupons payments
The benchmark six-month annualised premium closed at 4.71% (4.78%) with the annualised one-year premium closed at 4.75% (4.85%). Cash/tom traded at 1.30/1.35 paise while cash/spot traded at 1.70/1.80 paise. In month-wise premiums, August dollar traded at 13.00/13.50 paise, while in the far forwards, January dollar traded at 107/109 paise with July dollar at 220/222 paise.
FORECAST: Forward premiums seen stable to lower on Monday.

Gilts
Bond prices strengthened by 5-10 paise owing to profit-buying by a large nationalised bank, dealers said. Volumes also improved on the back of good buying demand in early trade Friday. “There was no fresh factors for prices to rise sharply, but no news is good news, and this was the main reason for some buying demand,” a dealer at a broking firm said.
“It is a total liquidity driven market and other that that there was no other driving force for prices to move in any direction,” the dealer added. However, many market players restricted large investments on fears of a bond auction soon. .The 11.50% 2011 paper was seen at Rs 114.07. On the NSE’s wholesale debt segment, trades worth Rs 2,039 crore were seen. Trades worth Rs 205 crore were seen in the 11.50% 2011A paper, while those in the 11.40% 2008 and 11.03% 2012 amounted to Rs 275 crore and Rs 210 crore respectively.
FORECAST: Prices seen firm Monday, trade expected to be
choppy.

(Compiled by Srikesh P. Menon)