Call Money
Call rates continued to hover around its notional floor—the Reserve Bank of India’s 7% refinance rate. Ample liquidity in the banking system was the primary reason for call to remain easy despite the auction drain. The Rs 6,000 crore auction drain seemed to very little effect the liquidity situation. In early trade, call rates on strong demand and from banks looking to meet with their daily reserve needs. However, call eased as demand thinned quickly being the Reporting Friday.
Opening the day at 6.95-7.10%, call rates eased to around owing to ample liquidity. Call rates closed at 6.75-6.90%. According to market players call has been ruling easy despite strong demand mainly due to ample liquidity. Elsewhere, the National Stock Exchange (NSE) pegged its overnight Mibid and Mibor at 6.92% and 7.04% respectively.
FORECAST: Call rates seen easy amid ample liquidity Saturday.

Spot Dollar
The rupee closed at a higher against the dollar Friday in thin trade. After opening weaker on mild interbank dollar demand the rupee remained in a narrow range for rest of trade. It rose slightly amid good supplies from corporates and also long-dollar liquidation by foreign banks. the rupee did not rise much owing to some demand from banks at lower levels. There was not much long-dollar posoitioning on expectations of accumulated dollar inflows on Monday. Supplies outstripped the thin demand. Opening the day at 47.1275, lower compared with its previuos close, the rupee weakened further to an intra-day low of 47.1350. However, it recovered to close at 47.1175 amid good dollar supplies. Meanwhile, the RBI fixed its reference rate for the dollar at 47.12 as against its previous fix 47.14. In cross-currency trades, the euro was closed at 42.05 with the pound-sterling at 67.08.
FORECAST: The rupee seen slightly firm Monday.

Forward Premiums
Forward premia traded in a very tight range Friday. Trade was relatively thin. Premiums opened unchanged from Thursday’s levels on the back easy inter-bank call rate. However, premiums rose a little in afternoon trade as some banks bought forward dollars but premiums recovered in late trade to end at Thursday’s levels on the back of a stable call rate. Ample near-term liquidity and easy call rates kept premiums in a very tight range. Premiums are expected to soften in the near-term amid the ample liquidity in the banking system. The benchmark six-month annualised premium closed at 4.72% (4.70%) with the annualised one-year premium closed at 4.72% (4.70%). Cash/tom traded at 1.30/1.40 paise while cash/spot traded at 1.70/1.75 paise. In month-wise premiums, August dollar traded at 8.50/9.00 paise, while in the far forwards, January dollar traded at 102/103 paise with July dollar at 217/218 paise.
FORECAST: Forward premiums seen soft Monday.

Gilts
Government securities rose sharply on the back on ample liquidity in the banking system. “Prices rose as there were no major announcement to turn the market sentiment negative,” a primary dealer said. “The market seems to have shrugged of the hurdles due to S&P and Moody’s downgrades,” the dealer added. GoI-Secs prices rose by around 50 paise Friday. Market players said quotes were one-sided, on the buying side, hardly anyone was selling. Trade was choppy with light profit-sales and bargain-buying taking turns. The Reserve Bank of India (RBI) got no bids at its 1-day repo, reverse repo auction Friday. The 11.50% 2011 paper was seen at Rs 114.60. On the National Stock Exchange ’s wholesale debt segment, trades worth Rs 4,445 crore were seen. Trades worth Rs 800 crore were seen in the 11.50% 2011A paper, while those in the 11.40% 2008 and 11.03% 2012 amounted to Rs 490 crore and Rs 683 crore respectively.
FORECAST: Prices seen firm Saturday.

(Compiled by Srikesh P. Menon)