Call Money
Call rates remained flat for most of Tuesday in thin trade. Call 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. Call trade in a narrow range of 6.80-7.00% as lenders were a bit reluctant to offer below 7% and borrowers were avoiding borrowing funds above 7%. Despite the strong demand, ample supplies kept the call rate below 7%,” dealers said. In early trade, demand was strong from banks looking to meet with their daily reserve needs. However, call eased as demand thinned towards late trade. Opening the day at 6.90-7.00%, call rates remain little changed to close at 6.80-7.00%. 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 6.87% and 7.00% respectively.
FORECAST: Call rates seen hovering around 7% Thursday.

Spot Dollar
The rupee moved in a thin range amid a quiet market. Volumes were low as most players stayed on the sidelines of the market. Inter-bank activity was subdued. Improved supplies of the dollar from exporters and foreign funds balanced the thin demand from state-run banks. Except for state-run banks buying dollars in small quantums, activity was relatively dull. Supplies outstripped the thin demand.
A few foreign banks sold dollar of foreign funds and their clients. Opening the day at 47.1150, little changed compared to its previous close.
The rupee closed at 47.1200 amid good dollar supplies. Meanwhile, the Reserve Bank of India (RBI) fixed its reference rate for the dollar at 47.12 as against its previous fix 47.12. In cross-currency trades, the euro was closed at 42.25 with the pound-sterling at 66.86.
FORECAST: The rupee seen in a narrow range Thursday

Forward Premiums
Forward premia traded in a very narrow range of one paisa Tuesday. The premiums opened little changed from its Monday’s levels and remained in a tight range for the rest of Tuesday. Trade was relatively thin. Premiums opened little changed from its previous levels on the back easy inter-bank call rate. However, premiums moved up a tad in afternoon trade on paying interest by a few banks. Lack of corporate demand and no market moving factors were said to be the main reason for lacklustre trade Monday. 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 4.80% (4.72%) with the annualised one-year premium closed at 4.80% (4.72%). Cash/tom traded at 0.85/0.90 paise while cash/spot traded at 1.35/1.45 paise.
FORECAST: Forward premiums seen slightly lower Thursday.

Gilts
Government securities prices moved in a very narrow range in thin trade Tuesday. Prices moved in a tight range of 5-10 paise. However, the underlying market sentiment continued to remain bullish on the back on ample liquidity in the banking system. Trade was choppy with profit-sales and bargain-buying taking turns. “Not many players were active and also lack of any market moving news also kept the market quiet,” a dealer at a private bank said. The Reserve Bank of India (RBI) rejected the sole bid for Rs 50 million it received at its 2-day repo, reverse repo auction Tuesday. The 11.50% 2011 paper was seen at Rs 114.69.On the NSE’s wholesale debt segment, trades worth Rs 1,950 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 285 crore and
Rs 230 crore respectively.
FORECAST: Prices seen firm Thursday.

(Compiled by Srikesh P Menon)